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 utilities since you can go to another service provider (i.e. they are not a monopoly) or they are not considered essential utilities (yet).

How quickly can I or we (joint husband and wife cases) file a Chapter 7 Bankruptcy ?

Very quickly depending on your situation. I have literally filed a bankruptcy case within the same hour that the person came to see me.  This was an emergency situation to prevent the foreclosure of the person's home.  Filing the bankruptcy before the sheriff's sale was concluded stopped the sale and gave the debtor a breathing spell. Usually depending on your situation and the difficulty of your case, I prepare your case and file it within a matter of a few weeks of your initial consultation. In cases where a person's wages are being garnished, I will file the case the same week.  How quickly the case gets filed also depends on you. All documents required must be supplied to my office and all Court and attorney fees required must be paid before the filing. My office generally files cases every week. If your case requires an urgent filing, please come see me in my office to make arrangements to get your automatic stay in place as soon as possible.

I'm married and want to file alone. How will my filing Bankruptcy affect my spouse?

There is no requirement to file jointly if you are married.  Many of my cases are filed for only one spouse of the married couple. If you are married and need to file by yourself the other spouse's credit report is usually not affected, because it is separate and distinct from yours, especially if there are no joint creditors.  If both husband and wife are joint on a debt (such as a credit card or medical bill), I would normally recommend a joint bankruptcy filing.  

How much debt do I need to be in to file a Chapter 7 Bankruptcy?

There is no minimum debt requirement in order to be able to file a Chapter 7.  The analysis of whether to file a Chapter 7 depends more on your present ability to repay your creditors.  Other factors to consider are the level of creditor harassment (i.e. calling you at home and work), utility shut offs, wage garnishments or other creditor actions.  I usually don't recommend a Chapter 7 Bankruptcy for any individual unless there is at least $5000 in debt to wipe out or discharge, making the filing worthwhile.  However, I have filed Chapter 7 cases for individuals with less debt but were being garnished by one or more creditors and made only minimum wage therefore making it impossible to file a Chapter 13 repayment plan.  I have also filed cases for people whose utilities were shut off and needed the Bankruptcy Court protection of the automatic stay to get turned back on.

Do I have to file Bankruptcy on all of my Credit Cards? What if I want to keep one?

Yes, if you owe a balance, list the debt. The law requires you to list all of your creditors on your bankruptcy petition. I tell my clients that even if they owe the local video store $3.79 for an overdue video, to list it on your bankruptcy schedules.  Many of my clients are worried that they cannot live without their Mastercard.  Trust me, life is possible without credit cards.  If you truly must have a credit card, there are options. If you have a credit card with a zero balance, it does not have to be listed and you may use it after you file bankruptcy. If you have a credit card with a low balance, you may wish to pay it off before filing your case.  Some creditors, particularly Sears, offer to cut your current balance to $500, even if you owe them $10,000 or more, if you reaffirm (sign an agreement that says you promise to pay them despite the bankruptcy) with them. Many of my clients are reporting to me that they are receiving pre-approved credit card applications shortly after filing their Chapter 7 case.  These are solicitations from credit card companies, even some of the same that were just discharged, enticing you to get back into the game. If used wisely and frugally (i.e. paying the balance in full each month), these may help you re-establish your credit.  Remember though, in many cases, overspending and overuse of credit cards are what often lead to the bankruptcy in the first place.  Be careful!

Where does my Chapter 7 Bankruptcy case get filed?

If you live in the Metro Detroit Area it will be filed in the US Bankruptcy Court for the Eastern District of Michigan, Southern Division located at 211 West Ford, Downtown Detroit.  Remember, bankruptcy law is a federal law and is therefore assigned to the Federal District Courts.  The Bankruptcy Courts are a subset of the Federal District Courts and hear all cases assigned to them.  All cases filed in Wayne, Oakland, Macomb, Monroe, St. Clair and Washtenaw Counties must all be filed in the Detroit Bankruptcy Court. If you live in the Flint or Bay City area, your case may be filed in there own jurisdiction.

What happens after my case is filed with the Bankruptcy Court in Detroit?

After your case is filed, the Court clerk usually mails out the "Notice of Commencement of Chapter 7 Bankruptcy" to you, your attorney, the Trustee assigned to your case and most importantly, all of your creditors.  This is why it is important to try your best to list all of your creditors in your bankruptcy.  They need to have "Notice" that you filed. The Notice of Commencement contains information about you such as your name, address and social security number so that the creditors can enter the fact that you filed a bankruptcy in your system and end collection activities.  The notice contains instructions and explanations regarding the automatic stay and penalties for violating the stay (i.e. trying to collect a debt from you).  The notice also tells you when and where your Meeting of Creditors will take place.  This is your Court date and you must attend it otherwise your case will be dismissed.  I as your attorney am also  required to attend  your "meeting of creditors." This "meeting" is actually not much of a meeting at all. You (and your spouse if this is a joint filing) must attend. I will be there because I include this in your fee, and the Interim Trustee will be there. The trustee is an attorney who is appointed to ask you questions about your case, which you will be required to answer under oath. The trustee then reports to the bankruptcy judge as to whether he recommends a discharge. All this may sound scary, but it is actually a brief and routine procedure. Most people are amazed at how easy it is. You will learn more of this later in the case. Naturally, your creditors may attend the meeting, but they rarely do. Once the meeting of creditors is concluded, the trustee will make his report to the court and will usually recommend a discharge. After the trustee makes his recommendation, the court will enter a "discharge" within about three months. The reason you will not be granted a discharge immediately, is that the creditors are given some time to object to your discharge (approximately 60 days after your .341 meeting of creditors unless an extension is granted), or to make application to the Court why their particular debt should not be discharged.    See the "Required Documents" link for a list of what you need to bring to this Court hearing with you.

What about my credit report, how will it look after filing Chapter 7 Bankruptcy?

My friends tell me that I won't get credit for seven years after I file, is this true?  I get this one all the time. First of all, understand that there is no law that says a future creditor or some other lender cannot give you credit after you file bankruptcy. In fact, these days with well over 1 million personal bankruptcies being filed every year, there is an entire credit industry that has evolved that solicits actively to individuals and couples who have recently filed a case.  My clients call me all the time just a few months after their bankruptcy and want to know what is going on, why are they getting all of these pre-approved credit card applications in the mail and how come all these finance companies want to sell them a car? Well the short answer is that these potential creditors want to be first in line to be your new credit cards after your fresh start. They no that most people will only file one bankruptcy in their life. That if the original bankruptcy was filed just because of bad financial planning (i.e. not loss of job, disability, divorce etc.) that the debtor probably has learned something from the experience and will be more careful with the way they use credit in the future. Finally, the creditor knows that you may not file another Chapter7 bankruptcy seeking the discharge of new debt for a period of six years. There is no question that a bankruptcy will hurt your ability to get credit in the future. But by the time a person comes into my office, their credit is already very bad.  The benefits of the bankruptcy discharge will greatly outweigh any negative impact on the credit report in the vast majority of cases that are filed. The fact that you filed a chapter 7 will appear on your credit record for ten years. Generally, the best (and probably the only) way to get good credit is to pay your bills on such terms as you originally agreed when they become due, i.e., pay at least the minimum payment. Bankruptcy, as you probably have figured out already does not pay your bills, it only releases you from personal liability or responsibility on them. In effect, the debt will still exist, but your creditors will be legally stopped from collecting anything from you, forever. Even if a year later you will $100 million in the lottery.  In other words, and for all intents and purposes, the indebtedness is canceled. While the bankruptcy will be listed on your credit record, you may be fortunate enough to find a creditor willing to overlook this, but then again, you may not; this question is entirely left up to the creditor. No one can be forced to give you credit and you should not contract for credit while your bankruptcy case is pending. Be careful with new credit card or other credit offers, remember, credit card are what got you here in the first place.

If you pay your post-bankruptcy case bills after the case is closed, you may find some creditors that are willing to give you credit -- possibly as soon as a year or two after you get your discharge. When you use credit again, it is in your best interests to use it with great restraint. In order to reduce the risk that you will have to ask the court for relief again, it is better to pay cash until you are very certain that circumstances are substantially changed from the way they were when you filed. Since you cannot ask the court for a Chapter 7 discharge more than once every six years (Chapter 13 may still be available though), you may put yourself and your family into jeopardy unintentionally and unnecessarily.