8884walter@sbcglobal.net    

 WM

 

 

 

 

 

 

 

 

 

 

 

 

 

   Certain basic concepts apply under both Chapter 7 and Chapter 13. The case is commenced by filing a petition with the bankruptcy court. The petition must list all of your assets, liabilities and other information required under the code. You cannot pick and choose which creditors to include on the petition, but that doesn't mean you cannot keep your home or vehicle, as will be explained later. All creditors must be listed. You may file as an individual or as husband and wife. Married couples do not have to file together if substantially all debts are solely in one spouse's name.

Your creditors can force you into bankruptcy. This is called an involuntary proceeding. For the most part, involuntary proceedings are confined to business cases. Almost all consumer cases are filed voluntarily. Approximately 75% of the cases I file a Chapter 7 "wipe-out debt" cases, the other 25% are Chapter 13 "reorganization or repayment plans" in which the debtor (or husband and wife) make payments to a Chapter 13 Trustee for a 3 to 5 year time period. Most Chapter 13 cases I file are for debtors who are trying to prevent a foreclosure of their home or repossession of their vehicle.  Some Chapter 13 cases are filed because the debtor's are not eligible to file a Chapter 7 either because they have filed a prior Chapter 7 in the previous six year or they have too many assets or make too much money or because they could pay their creditors a good percentage of what they owe with a Chapter 13 plan without too much of a burden on their way of life. Some clients will file a Chapter 13 repayment plan even if they qualify for a Chapter 7 just because they want to pay their creditors. Both Chapter 7 and Chapter 13 will stop creditor action such as a foreclosure or sheriff's sale, utility shut-off, vehicle repossession or wage garnishment. See below or link to my detailed frequently asked questions page for answers to more of your questions.  Feel free to e-mail me, come in to see me for a free consultation or call me locally at (313) 962-4656 or toll free at 888-Debt Gone or 888-4Walter.

The filing of the petition invokes what is known as the automatic stay. This means that your creditors are immediately prevented from doing anything further to compel collection of a debt. The harassing calls, garnishments, law suits, foreclosures, repossessions or shutting off of utility services are all stopped. The "stay" is designed to give you time to sort out your affairs free from the harassment of creditors.

In the petition, your debts are classified as either priority, secured or unsecured. Each is treated differently depending on which chapter is filed. Priority debts in consumer cases are usually limited to government tax liabilities and support obligations. Priority creditors have certain rights to payment over other creditors.

Secured debts are backed by property known as collateral, and typically consist of auto loans and mortgages. The creditor has a lien, or right to recover the property upon default. In most cases, liens attach to property by virtue of a written security agreement signed when the pledged property is purchased, or upon obtaining a loan.

Unsecured debts are almost everything else. They include credit cards, back utilities, medical bills, store charges and unsecured loans. Unsecured creditors do not have a lien or interest in your property. If you purchased certain property with a store charge or credit card, the seller cannot repossess that property on your default without a security agreement.

Filing Bankruptcy    

Of course, often it is not possible to satisfactorily negotiate a settlement with your creditors. Perhaps your credit card debt or other unsecured debt is overwhelming, with no reasonable prospect of ever paying it back. In this situation, the most responsible step to take for you and your family may be to obtain a financial “fresh start” through a Chapter 7 Bankruptcy . Or, if your mortgage company has started a foreclosure of your home or your vehicle has been seized, the possibility of working this out with your creditor is very slim. In this case, you will have to file a Chapter 13 Bankruptcy to save your property.

Should I File Under Chapter 7 or Chapter 13?        

You must ultimately decide for yourself whether filing bankruptcy is the proper action to take, and if so, which Chapter is better for you. Some of the factors to consider are as follows:

  • If you are not making more money than you need for your current living expenses (you have no “disposable income”), Chapter 13 is not a realistic option.

  • Chapter 7 has the advantage of wiping the slate clean and enabling you to embark on your “fresh start” immediately. With Chapter 13 you will be making payments for three to five years.

  • If you have a particular asset that you want to keep and that is valued above the allowable exemption then Chapter 13 may be the only alternative. For example, if you own a house with significantly more than $25,000.00 in equity and you don't want to lose it, Chapter 7 probably will not work.

  • If you are trying to ward off a repossession or a foreclosure, Chapter 7 will not help you, and you will need to file a Chapter 13.

  • If your debts are primarily consumer debts, and if your budget reveals that after filing bankruptcy your income substantially exceeds your expenses, it is possible that the United States Trustee could file a motion to dismiss the Chapter 7 case for “substantial abuse.” In such a case Chapter 13 may be the better alternative.

Chapter 7 is commonly known as straight or liquidation bankruptcy. Under this chapter, you are seeking to have your debts discharged, which means the legal obligation to pay creditors is canceled. You can pay all or some creditors after bankruptcy if you feel morally obligated, but is not legally required. You can file Chapter 7 no more than once every 6 years.

Certain types of debts are non-dischargeable. With some exceptions, they include student loans, taxes, alimony and child support, fraudulent debts, debts for embezzlement or larceny, debts incurred from purchasing luxury items or for taking large cash advances shortly before filing, fines and penalties, debts incurred as a result of a willful or malicious injury, unscheduled debts and debts denied discharge in a prior bankruptcy.

 

Secured debts are fully dischargeable but you may lose the collateral because valid liens survive bankruptcy, and the creditor is free to repossess or foreclose on the collateral once the bankruptcy case is concluded. If you want to keep the collateral you must reaffirm the debt. Reaffirmation means a legal re-obligation to pay the debt as if the bankruptcy never occurred. In exchange for reaffirming the creditor will allow you to keep the pledged property because the creditor is assured payment. Reaffirming requires that you sign a written contract that is filed with the court. You will most likely want to reaffirm on your home and automobile, but not charge cards or other debts unless there is good reason.

Once your petition is filed, a trustee is appointed to represent the best interest of your creditors. The trustee is given broad power under the law. He can set aside improper transfers of property, and can even recover money paid to creditors shortly before filing. The trustee makes sure that all creditors are treated fairly and equally in the bankruptcy proceeding.

 

Most importantly, however, the trustee is responsible for collecting and liquidating certain valuable assets at a bankruptcy sale. Your creditors are notified of the sale and have an opportunity to bid, or object to someone else's bid. Sale proceeds are distributed to creditors based upon the classification and priority of their debt. Any money left over is returned to you after creditors and administrative expenses are paid.

 

The trustee theoretically has an interest in all non-exempt assets you own up to the date the petition is filed. These assets, as a group, are called the bankruptcy estate. With limited exception, property you acquire after filing does not become part of the bankruptcy estate, and can not be taken by the trustee.

 

Does this mean you lose everything? Not at all. In most cases, your valuable property is either secured or exempt. Much of your other property, as a practical matter, may not be worth the expense of conducting a sale. A typical rule of thumb is that property with a value of less than $1000 will not be sold by a trustee.

 

The laws allow you to keep certain property above any liens or encumbrances to preserve your ability to live. These are called property exemptions. Exempt property, up to certain value limits, includes your home, vehicle, furniture, appliances and various other personal possessions. A complete list of exempt property is found under this site on the Assets & Exemptions page.

Can the trustee sell secured property? If the trustee sells secured property, he must first pay off the lien. Therefore, the trustee will not sell any secured property that at a minimum does not exceed the value of the lien. Therefore, if you can afford the payments on the secured debts, you can reaffirm with the creditor to keep the collateral if you choose.

For this reason, most people can keep their home and automobile, as there is usually limited equity in such property. A home, for example, may have a secured mortgage which leaves little or no equity in the property. Equity is further eroded if you deduct 10% of the home's sale price as an estimate of closing costs. In New York, a husband and wife can exempt up to $20,000 of equity in their home.

As long as equity does not exceed the exemption amount, the trustee is left with nothing to distribute to unsecured creditors if the property were sold. Therefore, the home has no value to the bankruptcy estate, and the trustee will not sell the property. The same holds true for a motor vehicle with equity less than $2,400.

Approximately 45 days after filing the petition, you are required to attend a meeting, known as the Section 341 first meeting of creditors. There, the trustee will determine whether there are assets to be liquidated, or whether there has been any improper conduct affecting your case. There is usually only one meeting, but occasionally a second meeting is scheduled if further information is needed. Your creditors are free to appear and ask questions as well, but creditors rarely attend. The length of the meeting may vary. It usually takes no more than an hour for all scheduled cases on the calendar to be completed.

Approximately two months after the meeting date, the court issues the discharge order signifying the conclusion of the case. The two month waiting period is designed to allow the trustee or a creditor enough time to file an objection to dischargeability, if appropriate. These objections to discharge are known as adversary proceedings, and are usually based on some alleged fraudulent activity. The U.S. Trustee's office, a branch of the Justice Department, can also object if they find that there has been a substantial abuse of the bankruptcy laws. The vast majority of cases, however, will be concluded without objections, and honest debtors should have nothing to fear.

The average case is completed in three to four months. You then have a fresh start, free from the harassment of creditors. While your creditors will not be paid after discharge, some can treat the discharged debt as a loss on their income tax return.

Chapter 13 is known as the wage earner or repayment plan bankruptcy. You can think of Chapter 13 as a debt consolidation, where you group all your debt together, and repay creditors over three to five years through an installment payment plan formulated with the help of your attorney. Chapter 13 can be filed more often than Chapter 7, as long as it is filed in "good faith".

The main advantage of filing under Chapter 13 is that your property is not liquidated by the trustee as in Chapter 7. You keep all of your property as long as you comply with the plan. But you are not completely discharging your debt. You must pay your creditors a percentage on the dollar established in accordance with your assets and ability to pay.

Not everyone can file under Chapter 13. For instance, there is a debt ceiling, or limit to the amount of debt you can have. Total secured debt cannot exceed $750,000, and unsecured debt cannot exceed $250,000.

The plan must also be feasible. To be eligible, you must have regular income such as wages, pensions, self-employment or other income sufficient to fund the plan. The plan cannot run longer than five years, and you must show the court that you have enough disposable income to pay your plan payments within that time.

Corporations cannot file under Chapter 13, and must use the more complex and expensive Chapter 11 bankruptcy if they wish to reorganize. A business proprietor that is not incorporated, however, can file under Chapter 13 provided the debt ceiling and other provisions under Chapter 13 are met.

The Chapter 13 Trustee acts as a disbursing agent. He collects your installment payments, and distributes them to creditors according to the plan.

All creditors may not be fully paid. Unsecured creditors, in many cases, may be paid only a small percentage on the dollar, and upon successful completion of the plan the remainder of their debt is discharged similar to Chapter 7.

To determine how much of your creditors will be paid in Chapter 13, the bankruptcy code provides two guidelines which determine the minimum amount unsecured creditors must receive through the plan. First, the disposable income test requires that you pledge all of your disposable income into the plan for at least a three year period of time. Disposable income is your monthly income after your monthly living expenses are paid. In other words, you must pay unsecured creditors as much as you can afford for at least three years.

Second, under the Chapter 7 test, you must pay unsecured creditors the same amount through your Chapter 13 plan as they would get had your property been liquidated under Chapter 7. Put another way, your plan must pay unsecured creditors an amount equal to the value of your non-exempt property.

Let's take an example. Assume we have a husband and wife owning a home with $30,000 worth of equity. Remember, only $20,000 worth of equity can be exempted. That leaves $10,000 worth of equity which, theoretically, would have been distributed to unsecured creditors if a Chapter 7 petition were filed. So, under the Chapter 7 test, this means that unsecured creditors must receive a total of $10,000 over the duration of a Chapter 13 plan. Now, let's assume there is $14,000 in total unsecured debt. By dividing $14,000 into the minimum $10,000 to be paid, you arrive at the percentage to be paid to unsecured creditors. 10,000 divided by 14,000 equals 0.71 or sevently-one cents on the dollar.

What about priority and secured debts? In every case, your plan must pay priority creditors in full. Also, secured creditors are entitled to be paid an amount equal to the value of their collateral. The difference between the value of the collateral and the balance of the note is the unsecured portion of the debt, and is grouped together and paid the same percentage as the other unsecured debts such as credit cards.

You must also provide for a trustee commission of approximately 5% of the total debt paid through the plan.

A simplified Chapter 13 Plan would look like the chart below. Let's assume this debtor owes $1,500 in back taxes, has $12,000 in credit card and other unsecured debt, and has a $6,000 loan secured with a car having a value of $4,000. also, let's assume this debtor has no non-exempt equity and very little disposable income, which makes this debtor eligible to pay the minimum five cents on the dollar to their unsecured creditors.

Similar to Chapter 7, in Chapter 13 you must attend a Section 341 meeting of creditors, held within 45 days of the filing. Unlike Chapter 7, however, the meeting is followed by a confirmation hearing. At the confirmation hearing, the plan is presented to a bankruptcy judge for his review. If there are no objections, and the plan meets the requirements of Chapter 13, then the judge will confirm the plan, which makes it binding upon creditors.

The first payment under the plan is due approximately 30 days after filing the petition. Thereafter, the payments must be made regularly under the terms of the plan. Debtors can make payments to the trustee themselves, or for convenience, the payments can be deducted directly from their wages.

Chapter 13 may have some advantages aside from allowing you to retain property which is otherwise non-exempt in Chapter 7. For instance, your co-signors are protected if the co-signed debt is paid in full through the plan. Delinquent mortgage payments, back property taxes and missed car payments can be paid through the plan to stop foreclosure or repossession.

Chapter 13 is commonly used to save a home from foreclosure. Under the code, a plan which proposes to pay all mortgage arrears through the plan can decelerate a mortgage default. You must, however, have enough disposable income both to fund the plan, and to start making the current mortgage payments once again directly to the lender as they become due after the petition is filed.

You can pay student loans, child support arrears or restitution through the plan, and some debts which are non-dischargeable in Chapter 7 may be partially dischargeable as an unsecured debt in Chapter 13.

When bankruptcy is appropriate, it is usually not a question of maintaining good credit - your credit standing is probably already damaged. Judgments, delinquent payments, and credit counseling services are reported to the credit agencies for long periods of time like bankruptcy. Few lenders give credit under those circumstances anyway, and even if you satisfy a judgement it still is a part of your credit history.

The credit reporting bureaus report a Chapter 7 filing for a period of almost ten years. The credit bureaus report a Chapter 13 filing for almost seven years as long as you successfully complete the plan. If the plan is dismissed, then the Chapter 13 will be reported for ten years as well.

A fresh start allows you to re-establish your damaged credit. Aside from being reflected on your credit report, the bankruptcy laws do not restrict you form obtaining credit after the case is completed. Keep in mind that whether you have good or bad credit is always a subjective decision in the eyes of a prospective creditor. Of course, you must be prepared to explain why it is necessary to file if a prospective creditor should inquire. Maintaining a good "track record" after filing will minimize the adverse impact of the financial troubles leading to the bankruptcy. With the right strategy, you can build good credit once again. Our office provides a booklet free of charge to each client explaining how to re-establish credit after bankruptcy.

There may be some "pre-filing" strategies to re-establish credit. A non-filing spouse's credit report is not affected by the bankruptcy unless the spouse is a co-signer on any of the debts. If only one spouse files then the other may be able to maintain a good credit standing. Also, if there is a bank card or line of credit with a zero balance before filing, you may be able to use the card after filing, provided it is not revoked by the creditor.

 

 

 

If you are looking for a Bankruptcy Attorney, find out and ask:

1. Is the attorney you talk to at the Office personally going to Court with you? Warning: Many Bankruptcy lawyers just shake your hand and send your file to a paralegal for processing. Later, an attorney you never talked to before shows up in Court. I, Walter Metzen, feel that no matter how simple the case may appear, my clients deserve to have the attorney who they hired, personally go to Court with them.

2. Beware of unlicensed bankruptcy petition preparers who are basically practicing law without a license and often give harmful and damaging misinformation to innocent people already in financial trouble. The United States Trustee's Office is doing its best to investigate and prosecute individuals preying upon Metro Detroit Michigan homeowners facing foreclosure. Beware of solicitors coming to your home and sending offers in the mail. Talk to a qualified attorney. One who will personally go to Court with you.

Acceleration clause - A provision in a contract which allows a creditor the right to immediately demand repayment of the entire amount of a debt upon a debtor's default.

Adversary proceeding - An action brought in the bankruptcy court primarily to determine the dischargeability of a specific debt, or objecting to the discharge of all debts.

Answer - A document issued by the defendant in a law suit stating the legal defenses to the plaintiff's summons and complaint.

Automatic stay - The law which takes effect immediately upon the filing of a bankruptcy petition prohibiting creditors from taking any action to compel collection of a debt.

Bankruptcy - A condition where a debtor cannot pay debts now or as they become due, and uses the protection of the law to reorganize their financial affairs by liquidating certain property or formulating a repayment plan.

Bankruptcy Code - Federal laws which govern bankruptcy proceedings.

Bankruptcy estate - the property of a debtor which comes under the jurisdiction of the bankruptcy court and trustee when filing for protection under the Bankruptcy Code.

Collateral - Property which is pledged as security for the repayment of a debt.

Conversion - The procedure for switching a case from one chapter to another under the Bankruptcy Code.

Creditor - One who is owed a debt under a legal obligation or promise.

Creditors meeting - A meeting required under Section 341 of the Bankruptcy Code, conducted by the trustee, and where the debtor can be examined concerning assets, finances or improper conduct having a bearing on the case.

Creditor reporting agency - A private agency, such as TRW or Equifax, primarily engaged in the operation of keeping and reporting certain financial information about people to various lenders and other subscribers.

Debtor - One who owes a debt.

Default - A failure to perform a legal obligation imposed by law or contract.

Deficiency - the unpaid balance of a secured debt after a creditor has repossessed and sold the collateral, and applied the proceeds towards the debt owed.

Discharge - The cancellation of a legal obligation or debt.

Discharge order - An order issued by a bankruptcy court judge directing that a debtor is no longer legally responsible for certain debts.

Equity - The value of property to its owner after all liens and encumbrances are satisfied and the costs of sale paid.

Execution - The legal process of enforcing a judgment by seizing and selling property of a debtor.

Exemption - A state or federal law which allows a debtor to retain certain property from a trustee or creditor so that a debtor is left with the basic necessities of life.

Foreclosure - A forced sale of real estate by a creditor to satisfy a defaulted mortgage, delinquent property taxes or a judgment.

Garnishment - A legal process where a debtor's property under another persons control can be taken and applied as payment towards a debt.

Hardship discharge - A special discharge granted by a bankruptcy court judge for certain debts, not normally dischargeable, under a finding of compelling circumstances which would make repayment of the debt an "undue hardship".

Homestead exemption - An exemption allowed a debtor for a certain amount of equity in the debtor's principle residence. New York debtors are allowed to exempt up to $10,000 of equity, or $20,000 where a husband and wife own the property jointly.

Judgment - The legal outcome resulting from a court action determining that a liability does or does not exist.

Judgment creditor - A creditor who has obtained a judgment in its favor and can now enforce the judgment by execution on property.

Judgment debtor - A person who has a judgment for money damages taken against them for an unsatisfied debt.

Judgment lien - A lien which attaches to real estate owned by the debtor when a creditor files a judgment with the county clerk's office where the property is located.

Lien - A legal interest in collateral which allows a creditor to take and sell the collateral should the debtor default. See also security interest.

Priority debt - Debts which have a special legal status entitling them to be paid ahead of secured and unsecured debts after property is liquidated in bankruptcy.

Mortgage - A lien on real estate.

Personal property - Movable property, also known as chattels. Also includes intangible property such as stocks, bonds or other securities.

Proof of claim - A document a creditor must file with the bankruptcy court in order to receive payment on their claim.

Purchase money security interest (PMSI) - A lien created when a loan or credit is specifically given to the debtor for the purchase of the item taken as collateral.

Reaffirmation agreement - A written agreement which legally re-obligates a debtor to pay a debt after bankruptcy. Usually given in exchange for allowing the debtor to keep collateral or obtain some other benefit from the creditor.

Reaffirmation hearing - A procedure no longer required under the bankruptcy code to validate reaffirmation agreements and protect debtors by ensuring that they understand their rights and obligations under the new agreement.

Real property - Land, real estate.

Redemption - The right of a debtor to regain title to property under a pending foreclosure proceeding by paying the judgment before sale; or a payment to creditor for the return of property taken, under a pending legal action such as repossession or replevin.

Secured debt - A debt subject to a security interest.

Security agreement - A written document which creates or provides for a security interest in collateral.

Security Interest - See lien.

Summons and complaint - Documents used to begin a civil court action to collect a debt.

Trustee - an individual, usually a local attorney, appointed to represent creditors in a bankruptcy proceeding, and responsible for administering the liquidation of assets in Chapter 7, or disbursing payments to creditors under a Chapter 13 Plan.

Unsecured debt - A debt not subject to a security agreement.

 

 

Detailed Answers to Frequently Asked Bankruptcy Questions

Click here to go to DetroitBankruptcyLawyer.com

to go to related site www.DetroitBankruptcyLawyer.com

to go to related site www.8884Walter.com

 

What is bankruptcy?

Bankruptcy is a legal procedure designed both to protect an individual or business that can't meet its financial obligations and to protect the creditors involved. To begin the process, proper papers must be filed.

Bankruptcy is a legal proceeding in which a person (the debtor) who is unable pay his or her bills (the creditors) can get a fresh start.  Bankruptcy is started by filing a petition with the Federal Bankruptcy Court.  The petition discloses all of the debtor's financial affairs including assets and liabilities.  Filing bankruptcy immediately and instantly, though sometimes only temporarily, stops creditors from seeking to collect debts.  Bankruptcy may also eliminate a debtor's obligation to pay many, if not all, debts incurred prior to the bankruptcy filing.   

There are specific chapters of the federal bankruptcy law. Proceedings under Chapter Seven (known as straight bankruptcy) involve taking most of the borrower's property. The court appoints a trustee to sell off the assets and distribute the cash among the creditors.

Proceedings under Chapter Thirteen (known as wage earner's bankruptcy) involve the borrower proposing a plan for repaying a portion of the debt in installments from the borrower's income.

Once the bankruptcy proceeding ends, the borrower is no longer liable. This occurs when the bankruptcy court enters a discharge order in a Chapter Seven case or the borrower has paid the debts due to his creditors according to a plan in a Chapter Thirteen case. In legal terms, the court has discharged the borrower from the debts. The borrower then starts over again with a clean financial slate, but the record of the bankruptcy will remain on the borrower's credit record for up to ten years.

Bankruptcy may be the best, or only solution for extreme financial hardship. However, it should be utilized exclusively as a last resort, since it always has long lasting consequences.

What are common reasons for filing bankruptcy?

Often a debtor (the person or married couple who is filing for bankruptcy) has: seriously overextended credit; become unemployed; experienced a reduction in income; suffered business reverses; significant medical expenses; marital problems such as divorce or separation, or very often is simply a victim of poor financial planning and credit card interest rates, late charges and over-limit penalties.

When should  bankruptcy be considered? 

A debtor should consider bankruptcy when: the interest charges on debts are so large that the monthly payments cover only the interest; there are unpaid bills such as would be difficult or impossible to pay off in the foreseeable future; there is a threat of foreclosure of a house or repossession of a car; a debtor is receiving frequent calls from creditors or summonses for civil court actions for nonpayment of debt or debtor's wages are being garnished.

What are the different types of bankruptcy? 

Chapter 7 (sometimes referred to as “straight bankruptcy”) is where a debtor's nonexempt assets are liquidated and most unsecured debts are discharged.  Chapter 13 (sometimes referred to as a "wage-earner plan") is where a debtor retains his assets but sets up a payment plan by which creditors are paid all or part of what is owed over a period of 3 to 5 years.  A chapter 13 debtor must have regular source of income, unsecured debts of less than $290,525, and secured debts of less than $871,550, and an ability to set out a budget whereby he realistically has some amount of money to pay his creditors (through the trustee) on a monthly basis.  Chapter 11 is generally used for business reorganization or individuals with debts in excess of the chapter 13 limits.  Chapter 12 is used for family farmers and chapter 9 is for municipalities.

 

What happens to my house and car ?

If you get behind in payments on debt secured by a lien against your home or car, creditors can repossess these items. Even if you voluntarily surrender the property, it may be considered a repossession for all legal purposes. Under repossession, the items will be sold, and money from the proceeds will be applied to the debt. If the sale proceeds are not enough to satisfy the lien and the expenses of the repossession sale, you may be held responsible for the difference. At this point, creditors can take whatever legal action is necessary, including filing a lawsuit against you.

The filing of a bankruptcy action cancels this debt, so that you will have no further obligation to pay. Under reorganization, you may have the opportunity to stop the repossession or to pay the debt under controlled circumstances with credit terms that you can afford. In some cases it may be possible to cancel the lien altogether. Sometimes it's even possible to have the repossessed property returned if it has not been sold.

Bankruptcy laws and procedures are complicated, so if you think you may need to reorganize your debts or file for a complete bankruptcy, you should to contact a qualified bankruptcy attorney.

 

How will lawsuits be affected?

Declaring bankruptcy prevents any lawsuits from being filed or judgments entered against you. If you file bankruptcy and a lawsuit against you is pending, it can go no further. If a judgment has been taken, its enforcement can go no further without first getting permission from the bankruptcy court.

If there are potential lawsuits against you, often the bankruptcy court will offer a forum where the dispute can be rapidly settled--thus avoiding the time and expense of taking the matter to state court.

Bankruptcy may be the best solution for extreme financial hardship. However, it should be used as a last resort, since it can have long-lasting consequences. The record of a bankruptcy can remain on your credit file for as long as ten years.

Be sure to consult with an attorney and a financial expert before resorting to bankruptcy as a means of solving your economic troubles.

 

Can employers discriminate?

It is illegal for an employer to discriminate against an employee that files for debt consolidation under Chapter 7 or Chapter 13. This includes both private and governmental employees. In addition, it is illegal for local, state, or federal governmental agencies to discriminate against a person as to the granting of licenses, permits, and similar grants because that person has filed debt consolidation. It is also illegal to be denied Federal Guaranteed Student loans solely for having filed a Bankruptcy.

For more information on employer discrimination in bankruptcy cases, talk with an attorney experienced in bankruptcy law.

 

Can student loans be included?

There are debts that are not dischargeable in Chapter Seven bankruptcy.

Federal law provides that student loan obligations cannot be included in any type of bankruptcy proceeding. The only exceptions to this rule are if the loan was originally due more than seven years prior to filing bankruptcy, or if repayment would cause the individual "undue hardship."

Nevertheless, inclusion of a student loan obligation in a debt consolidation proceeding may provide some benefit. For instance, the Automatic Stay provisions apply to student loan creditors, even though a student loan is not dischargeable. Therefore, the filing of a debt consolidation petition will stop telephone calls, harassment, and lawsuits from proceeding without permission of the Court. If you are able to satisfy your entire student loan obligation during the term of your debt consolidation plan, you could avoid interest and late charges which may otherwise be incurred.

Bankruptcy may be the best, or only solution for extreme financial hardship. However, it should be utilized exclusively as a last resort since it may have long-lasting consequences. Be sure to consult a financial expert before resorting to bankruptcy as a means of solving your economic troubles.

 

What does chapter 13 do to credit ?

Chapter Thirteen bankruptcy is a form of bankruptcy in which the debtor agrees to pay back his or her debts in small, regular payments. Therefore, this form of bankruptcy often results in the repayment of debts. Chapter Thirteen bankruptcy, however, still has long-lasting consequences and a record of it remains on credit files in credit bureaus for up to ten years. In some cases, potential creditors are more lenient with debtors who filed Chapter Thirteen, as opposed to Chapter Seven bankruptcy because they know the debtor is working to pay back a large percentage of the debt. Credit grantors have no legal duty, however, to give any special consideration on this basis.

For more information about the effects of Chapter Thirteen bankruptcy on credit, please consult attorney Walter Metzen toll free at 888-4WALTER or 888-DEBTGONE.

 

Are employers notified?

Although bankruptcy by an individual is a matter of public record, employers are not usually notified when a Chapter Seven case is filed. However, the trustee in a Chapter Seven case may contact an employer for information on the debtor's wages or salary at the time the case was filed. If there are important reasons for not informing an employer in a particular case, the trustee should be notified and he or she may be willing to make other arrangements to obtain the necessary facts.

For more information on Chapter Seven bankruptcy, consult with attorney Walter Metzen toll free at 888-4WALTER or 888-DEBTGONE.

 

Foreclosure of property?

Foreclosure of property is the legal process which enforces a mortgage and results in the public sale of property for payment of a defaulted loan. Under state law, this procedure may be initiated once the debtor on the loan has failed to comply with the obligations under that loan. Bankruptcy will stop a foreclosure proceeding from continuing until the Bankruptcy court grants approval for its continuation. Often the Bankruptcy Court will refuse to allow the foreclosure to continue if the individual filing bankruptcy has proposed for the payment of this debt in his or her Chapter Thirteen plan. Permission to continue with the foreclosure proceeding may also be denied if there is substantial equity in the property and a sale of the property will not only pay off the loans against that property, but also provide funds to the debtor and to the other creditors.

Bankruptcy will also stop the repossession of certain personal property under state law. Retention of this personal property is generally provided for in a debtor's Chapter Thirteen plan, or through certain exemptions in his or her Chapter Seven case.

For more information on foreclosure of property, consult attorney Walter Metzen toll free at 888-4WALTER or 888-DEBTGONE.

 

Do both spouses file chapter 7?

Whether or not your spouse needs to file Chapter Seven bankruptcy with you as a joint petitioner depends upon when the debt was incurred and the type of debt. In a community property state, your debts are usually your spouse's debts. Creditors may pursue your spouse for the entire community debt, unless it was incurred prior to marriage or can be shown to be a separate property debt. When a couple has separated, it makes good sense to at least offer a joint filing to the separated spouse. If the debts were incurred before marriage, or after legal separation with no intent to reunite, the spouse need not file.

  
 

 Chapter 13 vs. chapter 7?

There are advantages to filing Chapter 13 over Chapter 7 bankruptcy.

The first advantage is if you had people co-sign loans or other credit. Your creditors cannot collect from your cosigners until it is clear the Chapter 13 plan will not pay the amount owed. In contrast, if you file Chapter 7, your creditors have the right to immediately demand payment from your cosigners.

The second advantage is the discharge of debts under Chapter 13 is broader than it is under Chapter 7. For example, if you successfully complete a repayment plan under 13, individual creditors can't require you to pay in full if you gave them false financial information when you applied for credit, or if you used some other fraudulent means to get credit. Under 7 however, any creditor to whom you gave false or fraudulent information may object to discharging you from repaying the debt you owe.

Third, you can file under 13 more often than under 7. The law forbids you from filing under Chapter 7 more than once every six years. However, Chapter 13 allows you to file repeatedly.

Another advantage may be when you reapply for credit after the end of your bankruptcy proceeding. Potential creditors might prefer to see a Chapter 13 on your credit record instead of a Chapter 7. Chapter 13 often results in the repayment of debts. Creditors will know you are paying a greater percentage of your debt than you might in Chapter 7, although they have no legal duty to give any consideration on this basis.

For more information, consult attorney Walter Metzen toll free at 888-4WALTER or 888-DEBTGONE.

 

Chapter 13 vs. private debt consolidation?

Chapter 13 allows people who have steady incomes to pay all or a portion of their debts. In this type of debt consolidation case, the person who files must submit to the court a plan for the repayment of all or a portion of his or her debts. The plan must be approved by the court to become effective.

In contrast, private debt consolidation usually involves small loan companies that offer debt counseling through the use of high-interest "bill payer" or "debt consolidation" loans. There are also "financial counselors" who charge large fees.

Chapter 13 may be the best, or only solution for extreme financial hardship. However, it should be used as a last resort, since it can have long lasting consequences in relation to your credit.

On the other hand, private debt consolidation is seldom the recommended solution under any circumstances. A much smarter approach would be a nonprofit credit counseling service. They will contact your creditors and negotiate longer, smaller, and more manageable payment programs. For more information on Chapter 13 versus private debt consolidation, contact the credit counseling service of your city.

 Chapter 13 Bankruptcy Frequently Asked Questions 

 What is Chapter 13?

Chapter 13 is a chapter of the Bankruptcy Code that is structured for wages earners or small businesses. It enables debtors to immediately stop all debt collection activities (wage attachments, mortgage foreclosures, lawsuits, telephone calls, letters, bank setoffs). While this collection activity is stayed, your attorney proposes a plan of repayment and you begin pay on it. The plan may in most circumstances, propose payments in an amount less than 100% of your debts. Many debtors repay 10%, and some even pay less. The plan usually continues for three years, but in no event may it exceed five years. When the court confirms the plan, it becomes binding on your creditors. After you complete payments under the plan, the court cancels the balance of your debt. Chapter 13 is used frequently to stop mortgage foreclosures and can save your home; even at the last moment.

 What is the "automatic stay"?

The automatic stay is an automatic injunction against most continued collection activities. The automatic stay goes into effect as soon as your bankruptcy case is filed with the bankruptcy court. The automatic stay is important because it protects you from all collection activities. The automatic stay applies to virtually everyone and stops all activities that are calculated to collect money from you, or make it uncomfortable or embarrassing on you so that you want to pay. It stops everyone except for criminal courts demanding fines or restitution. It does not get you out of child support. It does not get you out of spousal support. It does not stop you for being arrested for not paying a fine. It does not give you criminal immunity. The automatic stay is "automatic". The court issues it just because you filed bankruptcy. You do not have to prove anything to get it.

Who can file a Chapter 13?

The Bankruptcy Code says that any individual with a regular income, i.e. a person with a stable income regular enough to allow him or her to make payments under a chapter 13 plan, can file a chapter 13 case. You do not need to have a job to file. You need only to have some source of regular income. You may not file a chapter 13 if a creditor has requested relief from the automatic stay in a prior bankruptcy that you filed, and you voluntarily dismissed the case. This bar continues for 180 days from the date you dismissed your case. You may also be barred from filing for the 180 day period if your case was dismissed for willful failure to abide by orders of the court, or to appear before the court in proper prosecution of his case.

Is there a limit on how much I can owe?

Yes. You cannot file a chapter 13 if you owe more than $269,250 in unsecured debts (e.g. credit cards, signature loans, other non-collateralized liability) and $807,750 in secured (mortgages, new car loans, etc.) debt.

Who notifies the creditors that I have filed?

The court notifies the creditors. It usually takes about two to three weeks. Some creditors may not "notice" that you have filed due to their size. They may continue to call you and send bills after you have filed. This may be because the address you give to your attorney may be just a billing service. Many creditors use these billing services instead of doing it themselves. There may be incompetent people working for the services. It is therefore important that you list the address given for reporting billing errors and not the payment address. The "errors" address usually goes to more competent people, since they need to know how to comply with federal law on billing errors.

Can a Chapter 13 save my home from foreclosure?

Yes, in most cases. One of the main purposes of a Chapter 13 is to enable a homeowner to cure the default owed to a mortgage company. In other words, to reinstate a mortgage to its pre-default status. This is done through payment of a Chapter 13 "plan." Under this plan, the debtor makes payments to a trustee usually over a 36 - 60 month period, which sum includes sufficient funds to reinstate the loan to current status. During this time period, the mortgage company cannot sell your home or in any way continue with the foreclosure process. If the mortgage company has not posted your home for foreclosure before you file your bankruptcy case, then the mortgage company cannot post your home for foreclosure after you file. However, you must make your regular mortgage payments while your Chapter 13 case is pending. If you fail to make your regular mortgage payments, the mortgage company can request that the Court modify the automatic stay to allow the mortgage company to foreclose on your home.

Can a Chapter 13 get my repossessed car back?

In many cases, the answer is also yes. However, if the car has been sold, or if you simply wait too long after repossession, it may be difficult or impossible to recover the vehicle. You must check with your attorney at the time you file for a more definitive answer. Most vehicle loan companies will return a car voluntarily after you file a chapter 13 (provided the car is not sold) if you show adequate insurance. This insurance usually must include collision and name the finance company as a loss payee, meaning the policy must specifically mention the loan company as the person/company which gets paid first in the event of a loss.

Can a Chapter 13 get my house back after a foreclosure sale?

This is a good reason why one should not to wait until the last minute to file. The short answer is "almost never." The long answer is "sometimes." Generally once your house is sold at a foreclosure sale, there is no sense filing a chapter 13 to try to save it. The filing of a case will not, in and of itself, set aside or vacate a foreclosure sale held in a regular manner in accordance with the law. Sometimes, and this is rare, the state court may set aside the foreclosure sale if the sale was conducted in an illegal manner, or without proper notice. It is usually very difficult to get a court to set aside the sale. Therefore, once the "hammer falls," you had better start looking for another place to live.

Do I have to maintain insurance on my home during the Chapter 13?

Yes. If you fail to maintain insurance on your home during your chapter 13 case, the chapter 13 trustee who will move to dismiss your case (throw it out of court) for refusing to protect the rights of your mortgage company and your other creditors. A destroyed home makes lousy collateral for a mortgage, puts the debtor out on the street and generally has a negative impact on future chapter 13 plan payments. You must have and maintain a current and valid fire insurance policy on all real estate to stay in bankruptcy.

How much will I have to pay in a Chapter 13 plan?

That depends upon several factors including, but not limited to, the amount of the arrearage on any secured debts such as your mortgage or car loan, whether you owe back taxes, the amount of your income, and the amount of your reasonable monthly expenses. Plans may not exceed 60 months. Some creditors may include interest over the life of the plan. This may also increase the amount you are paying. Interest over the life of the plan is sometimes allowed if there is sufficient equity in the property (i.e. the amount you would realize after final sale). Don't have any secured debts? If you are not curing mortgage or vehicle payment arrears, then your payment is governed by several rules: The payment must be the debtor's "best effort," that is, all of the debtor's projected disposable income that is earned in the three-year period will be applied to make payments under the plan. "Disposable income" means income which is received by the debtor and which is not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor; including a small charitable contribution not to exceed 15% of the debtor's gross income.

I do not have a job. Can I file Chapter 13?

Generally, any individual with a regular income can file a chapter 13. A regular income can come from social security, SSI, SSDI, private disability insurance, retirement income, government assistance (welfare), or any source of regular and dependable income.

Can I use rent receipts as income to fund my plan?

Yes, if you are receiving rent from any source, you can indeed use it to fund a chapter 13 plan.

What if my mortgage company or other creditor overcharges me? Do I have to accept what they say?

Just because you filed a bankruptcy, your creditors, and even and especially, your mortgage and car finance companies do not have the right to double charge, overcharge or charge without a reasonable explanation an sum amount in their proof of claim. A "proof of claim" is the document filed by a creditor stating what they believe you owe. It is not infallible. As a matter of fact, it is very often wrong. Fortunately, there is a way to handle any objection to any amount claimed from the debtor in bankruptcy. It is called an Objection to Proof of Claim and it can be filed for any claim.

Should I seek credit counseling before bankruptcy?

At present, there is no requirement to do so. Credit counseling may be a good idea to avoid bankruptcy, however, keep in mind certain things. Most credit counselors get paid by a percentage of what is paid to the creditors, by the creditors receiving the funds. this means that they have an interest in seeing that the creditors get the maximum. Credit counselors, therefore, do not have a "confidential relationship" with you. A confidential relationship is the type of relationship you have with an attorney. The attorney is legally obligated to avoid conflicts and represent only your interests. An attorney could be disciplined or disbarred from accepting payments from adverse parties, such as your creditors. Statements made to attorneys are always confidential, if made in private (between you, your spouse and the attorney, with no one else present). Statements made to a counselor are not. Credit counseling can be good for some people. It helps many people avoid bankruptcy, however, it is an open question whether is makes much of a difference on your credit record. The new bankruptcy law may require counseling, however, for now, there is no reason to follow the mandates of a statute that may never be passed, unless you want to for your own reasons.

In some circumstances, credit counseling is a very wrong answer. These include many of the reasons that people file chapter 13 in the first place:

  1. You should not seek credit counseling first (you should seek legal counsel) if your home or other real estate is in foreclosure.

  2. You should not seek credit counseling if you have been sued in court.

  3. There may be other reasons. If you have a question, it is always better to speak with an attorney first. Credit counselors simply cannot give legal advice you can rely upon, like an attorney can.

When should I consider filing a Chapter 13?

You should consider filing a chapter 13 if:

  1. Your house is being foreclosed upon.

  2. You have received a notice from your mortgage company that they intend foreclosure at any time in the future.

  3. You need some time to catch your breath, so that you can regain control of your life from your creditors.

  4. You are in severe financial difficulty and have tried, but cannot work other arrangements with your creditors.

  5. You have property (real or personal) that you need to protect and are in danger of losing to a creditor.

  6. You have committed a wrongful act respecting the debts (misrepresentation, fraud, etc.) and you feel that a creditor would object to your discharge in a chapter 7.

  7. You have income to pay less than 100% of the debts you owe and would like to make (in most cases) interest-free payments to unsecured creditors.

  8. You have an honest desire to not "run away from" your creditors, but are not in a financial position to pay all the debt, or all the debt and all the interest on that debt.

You should be aware that payments to mortgage creditors generally cannot be reduced or modified.

How can I pay for an attorney if I am "bankrupt?

There are a number of different manners of payment. One should consider that he will not be paying a significant portion of his indebtedness so that in itself, may free up funds for counsel fees. Sometimes, some of the fee may be paid through the chapter 13 plan without interest. You will then have up to five years to pay! This will increase your plan payments only marginally. Many people still would want to pay prior to filing because the total fee would be less.

How can I stop creditors harassing you or your family?

Filing a Chapter 13 acts as a stay (which means an Order of the court preventing this) of ALL creditor activity, including all collection action. This includes, suits, phone calls, letters, "friendly reminders" of indebtedness or visits from bill collectors. This includes legal papers, of course. Please note that it is the Bankruptcy Court that notifies your creditor. Therefore, just because you have filed bankruptcy, it does not mean that all your creditors will know immediately. It may take a few weeks for them to learn of the filing through the court. If a particular creditor is getting on your nerves, let me know and I will contact them. The harassment should then cease. If it does not, you may have the right to bring legal action against them.

What if I owe the electric company, will they shut off my power?

The Bankruptcy Code prohibits your local power, water, telephone, or any utility company from discriminating against you because you have filed a bankruptcy. It cannot shut off your power, water or phone service or refuse you any utility service just because you filed. You should be aware that your local utility company may request a deposit from you for continued service.

What about my credit record?

Fact: Bankruptcy will hurt your ability to obtain credit for some time to come. That you have filed a chapter 13 will appear on your credit record for ten years. In some circumstances, i.e. credit transactions in excess of $50,000, the credit record can reach back even further. Generally, the best (and probably the only) way to get good credit is to pay your bills, or at least the minimum amount due, when they become due. A chapter 13 will be listed on your credit record as just that; a chapter 13 bankruptcy. Your creditors may also be able to see if you completed your plan successfully, which is certainly to your advantage. Some people may be fortunate enough to find a creditor willing to overlook their bankruptcy. This may or may not be you; the question is left entirely up to the individual creditor. By the way, the bankruptcy trustee will require you to cut your credit cards in half and return them to the creditors. YOU MAY NOT CONTRACT FOR CREDIT WHILE THIS CASE IS PENDING!

I wrote a bad check to a creditor. Can that be discharged in a chapter 13?

Issuing a bad check is a crime in most states. The bankruptcy will not protect you from criminal prosecution and will not discharge criminal liability for restitution, costs or fines. In addition, you can be arrested, notwithstanding the bankruptcy. It is strongly recommended that you satisfy all bad checks before you file.

What exactly is expected of me in a Chapter 13 case?

The following are among the most important obligations you have in a chapter 13 case:

  1. Be truthful to all authorities involved, including your attorney. Lying in a bankruptcy proceeding is a federal crime and is punishable as such. It is often the case that a debtor can accomplish better results by truthfully disclosing unfavorable facts than by lying about them.

  2. Pay the plan faithfully. I will tell you the amount of your plan payments. If you miss two consecutive payments, your case is subject to dismissal. You may wish to request a wage attachment. If you do, the payments will come directly from your pay and you will not have to worry about payments, as long as your employer is making them. Of course, if your employer stops making payments for any reason, it is your responsibility to continue them. By the way, your first plan payment will be due the first full month after you file your bankruptcy. Retain your money order receipts as proof of payment.

  3. Attend court when directed to do so. Your court appearances will be minimal. Most debtors only appear one time, at what is called a "section 341" Meeting of the Creditors. At that meeting, the creditors are allowed to attend and ask questions, although it is rare that they actually do.

  4. Generally, these are the items that you will need to bring to a meeting of creditors:

    • Proof of your income (pay check stubs, etc.).

    • Proof of income from rent (leases or other agreements to pay you).

    • Proof of insurance for all vehicles and for your home (fire insurance or proof that the same is being paid through your mortgage payment) .

    • Copy of your most recent tax returns and any other items requested by the trustee.

5. PAY YOUR MORTGAGE! You may have been told of this obligation, but it cannot be stressed enough. Current monthly mortgage payments must be maintained. Payments must commence the month after filing your case. Pay the regular monthly amount to your mortgage company unless you are instructed to do otherwise. Should payments be refused by your mortgage company, report this fact to me at once. You are never excused from making current monthly mortgage payments. Your failure to comply with this requirement will eventually cost you your home. Be sure to retain your canceled checks as proof of payment. It is usually a good idea to enclose a copy of your bankruptcy petition with your first check to your mortgage company as proof of the filing of this case. They will need to know that you are in a chapter 13 case in order to begin accepting payments again. If you do not pay your mortgage payments (post-petition) and the mortgage company gets relief from the stay (is allowed to proceed with or commence a foreclosure), you are not allowed to just dismiss your case and start over. If you dismiss your case after a motion for stay relief is filed, then you must wait 180 days to refile. If the trustee dismisses your case, then the 180 day period is not applicable. Therefore, it is sometimes better to consider dismissing your case yourself if you get behind in your mortgage. There is no way to know exactly when a motion for stay relief will be filed by the mortgage company. It is best to stay current.

6. Obey all orders of the Bankruptcy Court.

7. Pay your car payment! If you fail to keep this current, your car is subject to repossession after relief from the stay is obtained. You must also keep your car fully insured.

What are the chances of my bankruptcy "not being accepted?"

For some reason, many clients are under the impression that "their bankruptcy has to be accepted." The truth is that once the case is filed, it is "accepted" by the court and the debtor receives relief from all debt collection activities, including, but in no way limited to:

  • The immediate stay of any litigation, excepting criminal and child support (also certain family matters);

  • Harassing phone calls;

  • Requests for payment;

  • Repossessions;

  • Electrical, water, telephone or other utilities being shut off;

  • Most types of setoff activity.

While it is true that your plan must be confirmed (i.e. made binding upon the rights of your creditors) by the court, your creditors do not have to accept the plan if:

  • It is your best effort;

  • It provides for a payment to unsecured creditors in an amount at least as much as they would receive if you had filed a Chapter 7 bankruptcy;

  • It provides that secured creditors will retain their liens; and

  • It otherwise complies with the minimum requirements for a chapter 13 plan under the law;

Of course, the statements above are simplified for the lay person's understanding. This is not to say that there may be other issues for the attorney to consider.

What if I want to sell my home (or real estate), and I have already filed a Chapter 13?

Sometimes, the debtor(s) in a chapter 13 case realize that the best way out of their problems is to liquidate (sell) their home or other real property owned by them at the time of filing. Many times the debtor(s) do not realize that all real estate owned at the time of the filing is subject to the jurisdiction of the court. Some courts in certain jurisdictions feel that, or allow plans that, revest complete ownership of the property when the plan is confirmed. Most of the time, however, the debtor(s) need to get permission of the court to sell their property.

After a sale, most times the trustee will take control of the proceeds after the liens are paid. The realtor and attorney(s) will need to get court approval of their fees in order to get paid from the sale. Realtors need to be appointed first in many if not all jurisdictions. The realtor, therefore, cannot just appear at the settlement or closing of title and ask that the title clerk or closing attorney withhold his fee. Furthermore, all sales prices are subject to approval of the court. If the court feels that the sales price is inadequate, then the court will disapprove the sale. If the court disapproves the sale and the sale takes place anyway, then the purchaser may not have valid title (thus creating a major headache for the purchaser and his title company).

In summary, when you sell real estate in a chapter 13, your creditors may get paid before you do. This depends greatly on the exemptions you and your counsel claim when you file.

I lost my job or cannot make my plan payments for another reason. What can I do?

If you are paying for arrears on your mortgage as a result of a foreclosure or threatened foreclosure, or for any reason, then your plan may already be at a minimum and may not be able to be reduced. If your plan calls for a certain percentage to unsecured creditors (e.g. credit cards, etc.), which percentage was based upon a wage figure that you can no longer support, then the plan can be reduced accordingly, as long as you provide for full payment for your mortgage arrears and any other arrears (e.g. vehicle payment arrears) that you need to pay.

If your plan has no secured creditors, then you can modify the plan to reduce it to any reasonable level that the court will approve. Often, you attorney will need to file a motion to have the new plan approved.

I just got some extra money. Can I pay off my chapter 13 plan early?

The answer is yes, if you are willing to pay your creditors 100%. Most courts will require a debtor to be in a chapter 13 at least for 36 months. The reasoning is that if the debtor has the money to prepay the plan, he maybe really did not need a break anyway. The debtor will be expected to continue to make his or her plan payments for at least the balance of the plan or a minimum of 36 months. The plan is not a loan that can be "prepaid."

What happens when I complete my Chapter 13 obligations?

After you have completed payments under the plan, and if no objections to discharge are filed, you will be receiving your discharge in bankruptcy. You are not be required to appear in court to get your discharge order. The discharge, as you know, "cancels" certain debts that you had at the time the bankruptcy was filed. It does not affect the lien of secured claims, however, it will cancel the personal liability only, on those debts. This means that if you owe money on the secured debt after you receive the chapter 13 discharge, your collateral is still subject to repossession, unless you remain current with that creditor.

If no objections to discharge are filed, you can expect to receive an order, signed by the Judge, in the mail after your completion of the plan. When you receive the discharge order, you should put it in a safe place with your other valuable and important papers because you may have to show it to creditors later.

What is the effect of a bankruptcy discharge?

You must understand several things about your bankruptcy discharge:

  • ONLY DEBTS LISTED ON YOUR BANKRUPTCY SCHEDULES can be discharged. If you have a debt that you owed at the time that the bankruptcy was filed, but do not have it listed, it will not be discharged. If you have such a debt, speak with me immediately and I will file amendments to the schedules and amend the plan, if required.

  • ONLY DEBTS OWED FROM THE PERIOD BEFORE THE BANKRUPTCY WAS FILED WILL BE DISCHARGED. This bankruptcy discharge will not discharge debts that you became obligated to pay during the bankruptcy. Your discharge will only cover your personal obligation to pay debts. It will not cover co-signers on your debts and it will have no effect on most security interests, like home mortgages and encumbrances on motor vehicles.

  • If you want to REAFFIRM A DEBT, AVOID A LIEN, OR REDEEM PROPERTY, you must do so BEFORE THE CONFIRMATION ORDER IS SIGNED. Therefore, you should tell me now if you want to do this. An explanation is in order:

    • Certain liens (judgments, levies, non-purchase-money interests in household goods) can be eliminated entirely by asking the court to do so. There is an additional fee for this service. If you are interested in this service, let me know and I will quote a fee.

    • Other liens, like mortgages, motor vehicle encumbrances, and purchase money security in other goods cannot be eliminated.

    • If you think that any of these agreements or motions should be filed in your case, or if you want additional information, contact me.

  • Remember: You can pay anybody you want after your discharge however, few debtors do. Depending on the length of your plan, you may not receive a discharge for 3 to 5 years.

  • The bankruptcy code prohibits the discharge of certain types of debts. Upon your request, I can describe to you in detail the types of debts that cannot be discharged. These debts include, but are not limited to: educational loans that first became due less than seven years ago, child support, certain taxes, including income taxes less than three years old. Furthermore, your taxes may not be dischargeable even if they are more than three years old in certain circumstances. These are, but are not limited to the following: (i) If you did not file a return, or (ii) if you did not file a return on time. In many instances, income taxes over three years old may be DISCHARGEABLE, however, to be sure, you must review your specific case with me.

  • It is important that you know the significance of your discharge order. If a debt is discharged, that creditor cannot force you to pay that particular debt. This means that the creditors cannot legally file an action against you (for that debt), continue an action that it had filed before the bankruptcy, send you collection letters or harass you in any other way. If this type of harassment occurs, you should contact me immediately, and I may be able to sue the creditor.

  • This information sheet is intended only as a summary of certain points of interest regarding your bankruptcy discharge. The terms used in this information sheet are intended to be simple so that they can be understood, the law is much more detailed. This information therefore is not "the law" and is only a summary designed to help you understand this phase of your bankruptcy.

Each bankruptcy is unique. Your case may have special facts making further discussion necessary. Do not be afraid to raise any issue if you feel uneasy about it. I will be pleased to answer any question you may have.

What if I forgot to list a creditor?

It is usually not a problem if it is caught before the confirmation hearing. This can be done even after the plan's confirmation. There is a Bankruptcy Court fee of $20. Your attorney may also charge a small additional fees for the service.

How can I hire you as my attorney to file a Chapter 13?

Please call me at 313-962-4656 or 888-4WALTER to request an appointment or send me an email at 8884walter@sbcglobal.net. Fees  are dependent upon the complexity of the individual case. Most fees are standardized, however expedited or complex matters may be charged accordingly.

 

What is Chapter 7 Bankruptcy?

Chapter 7also called "straight" or "liquidation" bankruptcy, is a way to legally discharge which is a legal term meaning wipe out or cancel your debts. When a person or married couple file a Chapter 7 bankruptcy, they are basically seeking a fresh start financially. Most of my clients complain that creditors and collection agencies are calling them at home and at work, utility companies have shut them off or are threatening to do so, or perhaps their wages are being garnished.  Filing a Chapter 7 bankruptcy can stop all of these dead in there tracks. Basically filing a Chapter 7 is accomplished by filing papers with the United States Bankruptcy Court asking for protection.  As soon as your case is filed (stamped with the date and time) an Order for relief is entered.  The Order for relief creates the "automatic stay" described in more detail below. Most people who file a Chapter 7 are seeking to wipe out debts like credit cards, medical bills, utility bills, bank and credit union loans, car loans for which the car was repossessed, in an accident with no insurance or just  broke down before it was paid off. A Chapter 7 discharge will wipe out or extinguish all of these debts. Chapter 7 involves an exchange between the person filing and the US Trustee, whose job it is to gather any non-exempt property of the debtor for the benefit of creditors. The person filing the Chapter 7 in exchange for getting all of their dischargeable debts wiped out, must disclose all of their assets (things and rights they own) to the Trustee.  In the vast majority of Chapter 7 cases that are filed, nothing is taken and sold by the Trustee, most cases are no asset cases. Remember, Chapter 7 is designed to leave you with a fresh start.  This means that the law is very generous in what you are allowed to keep or claim exempt. The most important thing is to list or disclose everything you own in your  bankruptcy petition. Most, but not all debts are dischargeable in Chapter 7 bankruptcy. Chapter 7 gives you a fresh start on your economic life within certain limitations. A person cannot file a Chapter 7 more than once every 6 years and certain types of debts are not dischargeable.  Student loans, most taxes, alimony and child support and debts for death or personal injury caused as a result of drunk driving or other intoxication are not dischargeable as a matter of public policy. Also, some people may have used credit in a fraudulent manner. For example, Chapter 7 bankruptcy is not for people who run up their credit cards with the intent of shortly thereafter going into bankruptcy. Chapter 7 bankruptcy is also not for people who charge much more than they could ever afford to pay just to discharge those debts. Moreover, it is not for anyone who basically acts in a dishonest or fraudulent manner. It is for the honest debtors, who, for circumstances they cannot control, find themselves overwhelmed in debt. Chapter 7 is also generally not appropriate for someone trying to save his house from a mortgage foreclosure. Generally, if you are about to lose your home for any reason, a Chapter 13 should be filed. Further, Chapter 7 is not for someone with the ability to make some reasonable payment on a month basis to unsecured creditors. For instance, if your budget would allow you to pay even ten cents on a dollar to creditors, you should generally file a Chapter 13 instead. See attorney Walter Metzen for a professional analysis of your financial situation and a thorough discussion of which Chapter may be best for you.

What is the "automatic stay"?

 THE AUTOMATIC STAY IS THE COURT ORDER THAT STOPS CREDITORS IMMEDIATELY, even if they don't yet know you filed bankruptcy. The automatic stay is one of the most powerful tools you as the debtor get when you file your bankruptcy petition. It happens automatically upon the filing of your case either Chapter 7 or Chapter 13.  It is so powerful that it can stop a foreclosure, a car repossession a utility shut-off and even a wage garnishment. I have even had the repo man return a car that he took from my client because a bankruptcy had been filed even though the repo man did not know. Most creditors who are regularly in the business of lending money know and respect the power of the automatic stay in bankruptcy and will abide by the law. The automatic stay is an automatic injunction against most continued collection activities. The automatic stay goes into effect as soon as your bankruptcy case is filed with the bankruptcy court. The automatic stay is important because it protects you from continued harassment from your creditors. The automatic stay applies to virtually everyone and stops virtually all activities that are calculated to collect money from you, or make it uncomfortable or embarrassing on you so that you want to pay. It stops everyone except for criminal courts demanding fines or restitution. It does not get you out of paying child support. It does not get you out of spousal support. It does not stop you for being arrested for not paying a fine. It does not give you criminal immunity. The automatic stay is "automatic". The automatic stay goes into effect immediately upon the filing of your bankruptcy petition. 

Should I seek credit counseling before bankruptcy?

Many of my clients have tried credit counseling before coming to see my to file a bankruptcy.  Credit counseling agencies which advertise heavily on television and call themselves non-profit agencies. Credit counseling agencies have no "real power" to deal with your creditors. Most actually get paid a percentage of the money that you pay your creditors through the agency. Most charge a start-up fee and a monthly maintenance fee which over the long run can add up significantly. Most people in credit counseling eventually do need to file a bankruptcy to deal with their creditors so the credit counseling was in vain. Some credit counseling agencies request access be given to a persons checking account so that the collection agency can take money out of the account every month or every pay period. I strongly discourage giving anyone such access to a bank account, I have seen many problems result from giving such access, such as bounced checks and inability of the debtor to make other necessary payments due to a disruption in their income. Credit counseling may be a good idea to avoid bankruptcy, however, keep in mind certain things. Most credit counselors get paid by a percentage of what is paid to the creditors, by the creditors receiving the funds. this means that they have an interest in seeing that the creditors get the maximum. Credit counselors, therefore, do not have a "confidential relationship" with you. A confidential relationship is the type of relationship you have with an attorney. The attorney is legally obligated to avoid conflicts and represent only your interests. An attorney could be disciplined or disbarred from accepting payments from adverse parties, such as your creditors. Statements made to attorneys are always confidential, if made in private (between you, your spouse and the attorney, with no one else present). Statements made to a counselor are not.  Does this mean that credit counseling is always a bad idea? No, credit counseling can be good for some people. It helps many people avoid bankruptcy, however, it is an open question whether is makes much of a difference on your credit record.

In some circumstances, credit counseling is a very wrong answer. These include many of the reasons that people file chapter 13 in the first place:

  1. You should not seek credit counseling first (you should seek legal counsel) if your home or other real estate is in foreclosure.

  2. You should not seek credit counseling if you have been sued in court.

  3. There may be other reasons. If you have a question, it is always better to speak with an attorney first. Credit counselors simply cannot give legal advice you can rely upon, like an attorney can.

I owe a lot of money to DTE Energy or SBC Ameritech, will they shut off my utilities if I file a bankruptcy?

No, a utility may not deny you service because you exercised your constitutional privilege to file a bankruptcy petition seeking relief from your creditors. In fact, I have filed many cases for individuals or couples for the only reason that they have huge utility bills and have been shut-off. The filing of a Chapter 7 will wipe-out all the past debt owed to the utility and the company has to start you fresh as if you just moved to Detroit from Timbuktu.  The utility companies by law cannot deny you service simply because you filed bankruptcy.  The law recognizes them as a public monopoly because you can't simply go to Meijer's and buy electricity or natural gas for your home. The way it works is this: You file your bankruptcy petition, being sure to list whichever utility company you owe on your list of creditors (schedule F and Matrix).  Approximately 10 days to 2 weeks later, the Bankruptcy Court mails out notices to all of the creditors you listed in your case.  All of the utility companies regularly get bankruptcy notice and most even have a bankruptcy department.  The company looks up all the accounts in your name, sometimes using a combination of your name and social security number.  Any and all accounts in your name are then wiped out and started fresh back to the date your petition was filed. Note: You are responsible for paying the new utility debts you incur after filing your bankruptcy (either Chapter 7 or 13).  If your utilities were cut off prior to your filing bankruptcy, tell my office and a fax will be sent to the utility company with proof of your filing and instructions asking them to restore service.  They will always restore the service unless it was turned on illegally (which is fraud and may not be dischargeable) or it turns out that the utility service was in some other person's name (who did not file bankruptcy). Your utility company may not discriminate against you because you have filed a bankruptcy case. This means they must continue supplying you with service and may not cut you off. Please note that your utility company will probably request a deposit from you for continued service. The deposit remains your money, but is held by the utility company as security for service. The deposit is usually equal to approximately twice your average monthly bill. If you owe no money to your utility company and do not list them as a debt, then utility companies may waive the requirement for a deposit. Note: Some services such as cable tv, internet or cell phone services are not considered