DEBT RELIEF CENTERS -- Bankruptcy attorneys in Dearborn, Michigan

Most lenders would agree that they would rather lend money to someone who filed a bankruptcy and owes no debt (and cannot file again for eight years) than to someone who is having trouble paying their current debts. There is no doubt that the best thing for your credit is paying your bills. But, if you are not able to pay your bills, filing a bankruptcy will be better for your credit than not paying your bills.

It depends on the kind of bankruptcy you filed, when it was filed, and the kind of bankruptcy you want to file now. Generally, a new Chapter 7 filing will not discharge your debts if you filed a Chapter 7 (and received a discharge) within the last eight years. This is the most common situation. Because the rules get complicated for other situations, you should consult your attorney for advice as to when or whether you can file a bankruptcy. Please contact us for a free consultation.

There are certain limits on the amount of property you are allowed to keep in bankruptcy, though the limits are fairly liberal. The vast majority of people who file bankruptcies keep everything they own. However, if there is a lien or mortgage on the property, you must be current on the loan or have an agreement with the lender to keep the property.

If you file a Chapter 13, there are often ways that the loan can be modified and any arrearages (unpaid and overdue debt) cured without having to surrender the property.

Generally, a bankruptcy will not discharge a student loan. A student loan can be discharged by showing hardship. While these are difficult to get, you should consult with your attorney about the possibility of getting a hardship discharge of your student loan.

In order for an income tax to be discharged, the tax return must have been due more than three years before the filing of the bankruptcy and the return must have actually been filed at least two years before the bankruptcy filing. There are other potential restrictions, so you should consult with your attorney. However, if a tax is more than three years old, it is often discharged in bankruptcy.

Chapter 7 is the most common kind of bankruptcy and is also know as “Liquidation”. In a Chapter 7, you are telling the court that you cannot afford to pay any of your debts. Assuming you meet all the requirements, the court will discharge your debts and you get a fresh start. Although it is called “liquidation”, the reality is that very few people lose any property in bankruptcy.

Chapter 13 is a kind of payment plan, typically for five years. In a Chapter 13, you are telling the court that you cannot afford to pay the amount your creditors want, but you can afford to pay a portion. The court will then approve a payment plan if it is convinced that you are offering your best effort. At the end of the plan, any unpaid debt is then discharged. Chapter 13 filings are also used to fix defaults in mortgages and modify car payments in certain cases.

If all goes well with your case, in a Chapter 7, you will have to appear at a “meeting of creditors” once, approximately one month after filing. Most creditors do not appear at the meeting, but when they do, it is a very simple, quick and civil process. Your attorney will prepare you for the meeting and attend with you.

In a Chapter 13, you will typically have to attend the meeting of creditors and one court hearing.

A Chapter 7 case can typically be filed within 48 yours of your meeting with you lawyer. You will have a meeting of creditors about one month after filing and you will get a discharge approximately two months after that. In all, the process takes three to four months.

In a Chapter 13, you will have a meeting of creditors about a month after filing and a confirmation hearing about two months after that. Then your payment plan will continue for five years (or three years, in some cases).

In either case (Chapter 7 or 13), all collection action (garnishments, phone calls, etc.) will stop immediately upon filing the case.

9. A relative/friend co-signed on one of my debts. If I file bankruptcy, how will it affect them?

Unfortunately, your relative/friend will still be liable for the debt unless they also file a bankruptcy. However, if you are filing a Chapter 13, the debt can be given special payment status that will prevent the creditor from collecting against them.

Yes, bankruptcy will stop the garnishment immediately. Depending on the timing, you may also be able to recover monies already garnished.

Under the bankruptcy reform enacted in October 2005, the court uses a “means test” to determine whether you make too much money. It is a very complicated formula based on where you live, marital status and number of dependants. Most people needing to file will still qualify for Chapter 7. Some will have to file a Chapter 13 instead.

12. My debts are all current. Do I have to be in default in order to file bankruptcy?

No. Your right to file a bankruptcy has nothing to do with whether your debts are current or not.

If all of your debts are in your name alone, your spouse will not have to file and the case should not affect his/her credit. If both of you have significant debts, you can file a joint case. Boren & Carey PC does not charge any extra for filing a joint case.

Although bankruptcy cases are a matter of public record, personal bankruptcies in the Detroit area are not reported in any newspaper or other media.

Yes. The bankruptcy will discharge your medical bills. In most cases, if you owe a doctor with whom you want to maintain a good relationship, a payment arrangement can be worked out.

17. I owe a close relative or friend some money. Should I pay them off before I file?

If you pay a creditor within 90 days before filing your bankruptcy, or a family member within one year before filing your bankruptcy, the bankruptcy trustee will likely try to get the money back and use it to pay all creditors equally. This is called a "preference". Before making any lump sum payments to any creditors, you should first consult with your attorney.

18. I have an asset that may be valuable. Should I give it to a relative or friend before I file?

No. When you try to "transfer" property to protect it, it is called a "fraudulent conveyance". While it is not a crime, the bankruptcy trustee can void the transfer and sell the asset for the benefit of all creditors. On the other hand, there are certain legitimate ways of protecting most property that consumer debtors own. The Bankruptcy Code and state law in Michigan provide a fairly liberal list of assets one is allowed to keep in bankruptcy. In fact, very few consumer debtors ever lose any property in bankruptcy. However, if you try to transfer an asset to protect it, you will lose the protection that the Bankruptcy Code would otherwise provide.

A credit report is certainly a useful tool in trying to create a complete list of creditors. However, credit reports are not always complete. If you do use a credit report, you would be well advised to still try to find any bills you have. You should also review the credit report and make note of any creditors that you know are missing from it.

If you are filing a Chapter 13 case and if the car has not yet been sold, you should be able to get it back. In order to get it back, you may be required to show full coverage insurance on the vehicle and provide a plan to pay the loan through your Chapter 13 plan. This is a very common procedure that your lawyer will explain to you further.

21. What is the difference between a "sheriff sale" and a "foreclosure sale"?

If you are filing a Chapter 7 case, the bankruptcy will temporarily stop the foreclosure. However, unless you are able to work something out directly with the mortgage company, the foreclosure process will eventually resume.

If you are filing a Chapter 13, your Chapter 13 plan can provide for mortgage payments and a cure of all mortgage defaults over a three- to five-year period. In order to stop the foreclosure, the Chapter 13 case must be filed before the actual foreclosure sale.

The bankruptcy will not actually clear up the report. It will indicate to any potential lender that you no longer owe the debts due to a bankruptcy discharge.

Generally, these offers will require a lump sum cash payment rather than monthly payments. For example, if you owe a creditor $10,000.00 and they offer to settle for $6,000.00, they will want the entire $6,000.00 at once. Before entering into any such deal, there are a few things you should know. First, it doesn’t make sense to settle with one creditor if you cannot settle with all your creditors. In other words, if you pay the one creditor the $6,000.00 and then still owe $30,000.00 of credit which you cannot pay, then you might as well save your $6,000.00. Second, you should know that any savings on a settlement is considered by the IRS and the State of Michigan to be taxable income. In our example, although you would have saved $4,000.00 on your debt, next April 15 you would have to pay income tax on that amount. Depending on your tax bracket, the tax could be as high as $1,400.00. Third, if you do enter into such a deal, you should insist on a letter from the creditor stating that the debt is paid in full on payment of the compromised amount. Finally, you should also know that debts settled in this way will show up on your credit report as "compromised at less than balance due". This indication is a blemish on your credit record.

We advise that you should be very wary of the following regarding non-bankruptcy payment plans. First, there are many legitimate credit counseling agencies who get clients into payment plans that essentially put the client on an indefinite treadmill. If you do work out such a plan, make sure you question your advisor as to specifics of your plan. Most importantly, ask for a clear statement of when you will be done with your plan.

Second, unfortunately, there are some companies that offer plans that can cost a lot of money and not help you any. The most common of these is a plan in which you pay a large lump sum up front and make monthly payments for a few years. The company collects your money and takes a large fee up front. They then wait for a year or so and then contact the creditors to offer a settlement of typically 50%. There are many problems with this system. Your creditors have no obligation to settle and, during the waiting period, they continue to call and you continue to accrue late pay indications on your credit report. Worse, if you happen to miss a payment, the company can often call the deal over and keep their fee.

There may be legitimate operators in this area, but there are many companies that charge a lot of money for doing very little. We once had a client who owed the IRS about $80,000.00 in income taxes from years in which she had a lucrative business. When her business failed, she got a job making $25,000.00 per year and hired a company to negotiate the tax debt. The company charged her $4,000.00 and prepared a simple "offer in compromise" which offered to pay the IRS 50% of the taxes...in one lump sum! The IRS turned the offer down, but she couldn’t have paid the $40,000.00 even if they had accepted. When she complained to the company, they insisted they were paid to propose an offer, which they did, and they refused to refund her money. The lesson: be careful! If you do have significant tax problems, the liabilities may be discharged in whole or in part in a bankruptcy. If not, you would be better advised to let a known local Certified Public Accountant handle the negotiations.

Debt Relief Centers | Boren & Carey P.C. Bankruptcy Attorneys
Two locations: 2727 South Telegraph, Dearborn, Michigan 48124 | 313-429-0285
28151 Woodward, Berkley, Michigan 48072 | 248-554-3100