detailed questions and answers about chapters 7 and 13

8/6/2019 Detailed Questions and Answers About Chapters 7 and 13

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Detailed Questions and Answers about Chapters

7 &13

What is bankruptcy?

Bankruptcy is a legal proceeding in which a person (the debtor) who is unable pay hisor her bills (the creditors) can get a fresh start. Bankruptcy is started by filing a petitionwith the Federal Bankruptcy Court. The petition discloses all of the debtor's financialaffairs 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.

What are common reasons for filing bankruptcy?

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

When should bankruptcy be considered?

Adebtor should consider bankruptcy when: the interest charges on debts are so largethat 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 offoreclosure of a house or repossession of a car; a debtor is receiving frequent calls fromcreditors or summonses for civil court actions for nonpayment of debt or debtor's wagesare 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. Chapter13 (sometimes referred to as a "wage-earner plan") is where a debtor retains his assetsbut sets up a payment plan by which creditors are paid all or part of what is owed over aperiod 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, andan ability to set out a budget whereby he realistically has some amount of money to payhis creditors (through the trustee) on a monthly basis. Chapter 11 is generally used for


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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 is Chapter 7 Bankruptcy?

Chapter 7also called "straight" or "liquidation" bankruptcy, is a way to legally dischargewhich is a legal term meaning wipe out or cancel your debts. When a person or marriedcouple 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 athome and at work, utility companies have shut them off or are threatening to do so, orperhaps their wages are being garnished. Filing a Chapter 7 bankruptcy can stop all ofthese dead in there tracks. Basically filing a Chapter 7 is accomplished by filing paperswith the United States Bankruptcy Court asking for protection. As soon as your case isfiled (stamped with the date and time) an Order for relief is entered. The Order for reliefcreates the "automatic stay" described in more detail below. Most people who file aChapter 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 withno insurance or just broke down before it was paid off. A Chapter 7 discharge will wipeout or extinguish all of these debts. Chapter 7 involves an exchange between theperson filing and the US Trustee, whose job it is to gather any non-exempt property ofthe debtor for the benefit of creditors. The person filing the Chapter 7 in exchange forgetting 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 thatare 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 thelaw is very generous in what you are allowed to keep or claim exempt. The mostimportant 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 youa fresh start on your economic life within certain limitations. A person cannot file aChapter 7 more than once every 6 years and certain types of debts are notdischargeable. Student loans, most taxes, alimony and child support and debts fordeath or personal injury caused as a result of drunk driving or other intoxication are notdischargeable as a matter of public policy. Also, some people may have used credit in afraudulent manner. For example, Chapter 7 bankruptcy is not for people who run uptheir credit cards with the intent of shortly thereafter going into bankruptcy. Chapter 7bankruptcy is also not for people who charge much more than they could ever afford topay just to discharge those debts. Moreover, it is not for anyone who basically acts in adishonest or fraudulent manner. It is for the honest debtors, who, for circumstances theycannot control, find themselves overwhelmed in debt. Chapter 7 is also generally notappropriate 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 befiled. Further, Chapter 7 is not for someone with the ability to make some reasonablepayment on a month basis to unsecured creditors. For instance, if your budget wouldallow you to pay even ten cents on a dollar to creditors, you should generally file aChapter 13 instead. See attorney Walter Metzen for a professional analysis of yourfinancial situation and a thorough discussion of which Chapter may be best for you.


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What is the "automatic stay"?

THE AUTOMATIC STAY IS THE COURT ORDER THAT STOPS CREDITORSIMMEDIATELY, even if they don't yet know you filed bankruptcy. The automatic stay isone 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 orChapter 13. It is so powerful that it can stop a foreclosure, a car repossession a utilityshut-off and even a wage garnishment. I have even had the repo man return a car thathe took from my client because a bankruptcy had been filed even though the repo mandid not know. Most creditors who are regularly in the business of lending money knowand 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 collectionactivities. The automatic stay goes into effect as soon as your bankruptcy case is filedwith the bankruptcy court. The automatic stay is important because it protects you fromcontinued harassment from your creditors. The automatic stay applies to virtuallyeveryone and stops virtually allactivities that are calculated to collect money from you,

or make it uncomfortable or embarrassing on you so that you want to pay. It stopseveryone except for criminal courts demanding fines or restitution. It does not get youout of paying child support. It does not get you out of spousal support. It does not stopyou for being arrested for not paying a fine. It does not give you criminal immunity. Theautomatic stay is "automatic". The automatic stay goes into effect immediately upon thefiling 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 abankruptcy. Credit counseling agencies which advertise heavily on television and call

themselves non-profit agencies. Credit counseling agencies have no "real power" todeal with your creditors. Most actually get paid a percentage of the money that you payyour creditors through the agency. Most charge a start-up fee and a monthlymaintenance fee which over the long run can add up significantly. Most people in creditcounseling eventually do need to file a bankruptcy to deal with their creditors so thecredit counseling was in vain. Some credit counseling agencies request access begiven to a persons checking account so that the collection agency can take money outof the account every month or every pay period. I strongly discourage giving anyonesuch access to a bank account, I have seen many problems result from giving suchaccess, such as bounced checks and inability of the debtor to make other necessarypayments due to a disruption in their income. Credit counseling may be a good idea toavoid bankruptcy, however, keep in mind certain things. Most credit counselors get paidby a percentage of what is paid to the creditors, by the creditors receiving the funds. thismeans that they have an interest in seeing that the creditors get the maximum. Creditcounselors, therefore, do not have a "confidential relationship" with you. A confidentialrelationship is the type of relationship you have with an attorney. The attorney is legallyobligated to avoid conflicts and represent only your interests. An attorney could bedisciplined or disbarred from accepting payments from adverse parties, such as yourcreditors. Statements made to attorneys are always confidential, if made in private


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(between you, your spouse and the attorney, with no one else present). Statementsmade to a counselor are not. Does this mean that credit counseling is always a badidea? No, credit counseling can be good for some people. It helps many people avoidbankruptcy, however, it is an open question whether is makes much of a difference onyour credit record.

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

1. Youshouldnotseekcreditcounselingfirst (youshouldseeklegalcounsel)if yourhome orotherrealestateisin 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 canrely upon, like an attorney can.

I ow

e a lot of money to DTE Energy orS

BC Ameritech,w

ill they shut off myutilities if I file a bankruptcy?

No, a utility may not deny you service because you exercised your constitutionalprivilege to file a bankruptcy petition seeking relief from your creditors. In fact, I havefiled many cases for individuals or couples for the only reason that they have huge utilitybills and have been shut-off. The filing of a Chapter 7 will wipe-out all the past debtowed to the utility and the company has to start you fresh as if you just moved to Detroitfrom Timbuktu. The utility companies by law cannot deny you service simply becauseyou filed bankruptcy. The law recognizes them as a public monopoly because you can'tsimply go to Meijer's and buy electricity or natural gas for your home. The way it works

is this:Y

ou file your bankruptcy petition, being sure to list whichever utility company youowe on your list of creditors (schedule F and Matrix). Approximately 10 days to 2 weekslater, the Bankruptcy Court mails out notices to all of the creditors you listed in yourcase. All of the utility companies regularly get bankruptcy notice and most even have abankruptcy department. The company looks up all the accounts in your name,sometimes using a combination of your name and social security number. Any and allaccounts in your name are then wiped out and started fresh back to the date yourpetition was filed. Note: You are responsible for paying the new utility debts youincur after filing your bankruptcy (either Chapter 7 or 13). If your utilities were cutoff prior to your filing bankruptcy, tell my office and a fax will be sent to the utilitycompany with proof of your filing and instructions asking them to restore service. Theywill always restore the service unless it was turned on illegally (which is fraud and maynot be dischargeable) or it turns out that the utility service was in some other person'sname (who did not file bankruptcy). Your utility company may not discriminate againstyou because you have filed a bankruptcy case. This means they must continuesupplying you with service and may not cut you off. Please note that your utilitycompany will probably request a deposit from you for continued service. The depositremains your money, but is held by the utility company as security for service. Thedeposit is usually equal to approximately twice your average monthly bill. If you owe no


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money to your utility company and do not list them as a debt, then utility companies maywaive the requirement for a deposit. Note: Some services such as cable tv, internet orcell phone services are not considered utilities since you can go to another serviceprovider (i.e. they are not a monopoly) or they are not considered essential utilities (yet).

How

quickly can I orw

e (joint husband andw

ife cases) file a Chapter 7Bankruptcy ?

Very quickly depending on your situation. I have literally filed a bankruptcy case withinthe same hour that the person came to see me. This was an emergency situation toprevent the foreclosure of the person's home. Filing the bankruptcy before the sheriff'ssale was concluded stopped the sale and gave the debtor a breathing spell. Usuallydepending on your situation and the difficulty of your case, I prepare your case and file itwithin a matter of a few weeks of your initial consultation. In cases where a person'swages are being garnished, I will file the case the same week. How quickly the casegets 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 officegenerally files cases every week. If your case requires an urgent filing, please come seeme in my office to make arrangements to get your automatic stay in place as soon aspossible.

I'm married and want to file alone. Howwill my filing Bankruptcy affect myspouse?

There is no requirement to file jointly if you are married. Many of my cases are filed foronly one spouse of the married couple. If you are married and need to file by yourselfthe 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 wifeare joint on a debt (such as a credit card or medical bill), I would normally recommend ajoint 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. Theanalysis of whether to file a Chapter 7 depends more on your present ability to repayyour creditors. Other factors to consider are the level of creditor harassment (i.e. callingyou at home and work), utility shut offs, wage garnishments or other creditor actions. Iusually don't recommend a Chapter 7 Bankruptcy for any individual unless there is atleast $5000 in debt to wipe out or discharge, making the filing worthwhile. However, Ihave filed Chapter 7 cases for individuals with less debt but were being garnished byone or more creditors and made only minimum wage therefore making it impossible tofile a Chapter 13 repayment plan. I have also filed cases for people whose utilities wereshut off and needed the Bankruptcy Court protection of the automatic stay to get turnedback on.


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

Yes, if you owe a balance, list the debt. The law requires you to list all of your creditorson 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 clientsare worried that they cannot live without their Mastercard. Trust me, life is possiblewithout credit cards. If you truly must have a credit card, there are options. If you havea credit card with a zero balance, it does not have to be listed and you may use it afteryou file bankruptcy. If you have a credit card with a low balance, you may wish to pay itoff before filing your case. Some creditors, particularly Sears, offer to cut your currentbalance to $500, even if you owe them $10,000 or more, if you reaffirm (sign anagreement that says you promise to pay them despite the bankruptcy) with them. Manyof my clients are reporting to me that they are receiving pre-approved credit cardapplications shortly after filing their Chapter 7 case. These are solicitations from creditcard 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 eachmonth), these may help you re-establish your credit. Remember though, in manycases, overspending and overuse of credit cards are what often lead to the bankruptcyin 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 theEastern District of Michigan, Southern Division located at 211 West Ford, DowntownDetroit. Remember, bankruptcy law is a federal law and is therefore assigned to theFederal District Courts. The Bankruptcy Courts are a subset of the Federal District

Courts and hear all cases assigned to them.A

ll cases filed in Wayne,O

akland,Macomb, Monroe, St. Clair and Washtenaw Counties must all be filed in the DetroitBankruptcy Court. If you live in the Flint or Bay City area, your case may be filed inthere 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 Commencementof Chapter 7 Bankruptcy" to you, your attorney, the Trustee assigned to your case andmost importantly, all of your creditors. This is why it is important to try your best to listall of your creditors in your bankruptcy. They need to have "Notice" that you filed. TheNotice of Commencement contains information about you such as your name, addressand social security number so that the creditors can enter the fact that you filed abankruptcy in your system and end collection activities. The notice contains instructionsand 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 yourMeeting of Creditors will take place. This is your Court date and you must attend itotherwise your case will be dismissed. I as your attorney am also required to attendyour "meeting of creditors." This "meeting" is actually not much of a meeting at all. You


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(and your spouse if this is a joint filing) must attend. I will be there because I include thisin your fee, and the Interim Trustee will be there. The trustee is an attorney who isappointed to ask you questions about your case, which you will be required to answerunder oath. The trustee then reports to the bankruptcy judge as to whether herecommends 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.Y

ou will learn more of this later inthe case. Naturally, your creditors may attend the meeting, but they rarely do. Once themeeting of creditors is concluded, the trustee will make his report to the court and willusually recommend a discharge. After the trustee makes his recommendation, the courtwill enter a "discharge" within about three months. The reason you will not be granted adischarge immediately, is that the creditors are given some time to object to yourdischarge (approximately 60 days after your .341 meeting of creditors unless anextension is granted), or to make application to the Court why their particular debtshould not be discharged. See the "Required Documents" link for a list of what youneed to bring to this Court hearing with you.

What about my credit report, how

w

ill 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 thisone all the time. First of all, understand that there is no law that says a future creditor orsome other lender cannot give you credit after you file bankruptcy. In fact, these dayswith well over 1 million personal bankruptcies being filed every year, there is an entirecredit industry that has evolved that solicits actively to individuals and couples who haverecently filed a case. My clients call me all the time just a few months after theirbankruptcy 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 companieswant 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 mostpeople will only file one bankruptcy in their life. That if the original bankruptcy was filedjust because of bad financial planning (i.e. not loss of job, disability, divorce etc.) thatthe debtor probably has learned something from the experience and will be more carefulwith the way they use credit in the future. Finally, the creditor knows that you may notfile another Chapter7 bankruptcy seeking the discharge of new debt for a period of sixyears. There is no question that a bankruptcy will hurt your ability to get credit in thefuture. 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 onthe credit report in the vast majority of cases that are filed. The fact that you filed achapter 7 will appear on your credit record for ten years. Generally, the best (andprobably the only) way to get good credit is to pay your bills on such terms as youoriginally agreed when they become due, i.e., pay at least the minimum payment.Bankruptcy, as you probably have figured out already does notpayyourbills, it onlyreleases you from personal liability or responsibility on them. In effect, the debt will stillexist, 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 forall intents and purposes, the indebtedness is canceled. While the bankruptcy will belisted on your credit record, you may be fortunate enough to find a creditor willing to


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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 yourbankruptcy 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 somecreditors that are willing to give you credit -- possibly as soon as a year or two after youget your discharge. When you use credit again, it is in your best interests to use it withgreat restraint. In order to reduce the risk that you will have to ask the court for reliefagain, it is better to pay cash until you are very certain that circumstances aresubstantially changed from the way they were when you filed. Since you cannot ask thecourt for a Chapter 7 discharge more than once every six years (Chapter 13 may still beavailable though), you may put yourself and your family into jeopardy unintentionallyand unnecessarily.

My incorporated business is ceasing operations, should it file for chapter 7

bankruptcy?

It depends. A corporation is entitled to no exemptions and receives no discharge.Good reasons to file a corporate chapter 7 would include: to stop a creditor from

executing on valuable assets that could otherwise be utilized to pay debts for which theprincipals are liable (e.g. trust fund taxes or other personally guaranteed debts); torecover preference payments that could be used to pay debts for which the principalsare liable; to insulate the principals from allegations that the liquidation of thecorporation was handled improperly; the principals would rather turnover liquidation ofthe corporation to a trustee instead of handling it themselves. Good reasons for thecorporation to not file for bankruptcy might include the time and expense of the

bankruptcy and the scrutiny of past dealings between the corporate insiders and thecorporation. There is no requirement that a insolvent corporation file for bankruptcy andstate law dissolutions or simply "shutting the doors" are common alternatives.

Why would a debtor choose chapter 13 over chapter 7?

The primary reasons include: the debtor owns nonexempt property that the debtorwould like to retain but could not in chapter 7; a debtor is behind on car or housepayments and needs to cure the arrearages over time; a debtor seeks to "strip-down"the amount of a secured debt to the value of the collateral (not available as to firstmortgages on a debtor's residence); the debtor has received a prior bankruptcydischarge within 6 years; the debtor has debts that are not dischargeable in chapter 7(e.g. certain taxes, fraud, defalcation of fiduciary duty, or willful and malicious injury); adebtor is seeking to protect a co-debtor; or a debtor likely has need of bankruptcy reliefin the future. In some cases, a debtor with a high income and an ability to repay debtsover a period of time, may be not be permitted a discharge in chapter 7 and thereforechapter 13 will be his only option.


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How much do creditors receive in a chapter 13 plan?

The debtor must pay all his available disposable (after reasonable monthly expenses)income to the plan for at least 36 months. The creditors must receive at least as much

money in chapter 13 as they would have received in chapter 7 (also known as theliquidation test). Secured creditors such as mortgage holders are generally paid in fullor caught current with the chapter 13 payments. Priority claims, which include attorneyfees, certain taxes and back alimony and child support, must be paid in full under theplan. Different plans will pay the unsecured creditors anywhere between 10% to 100%of their claim depending on the liquidation test and the debtor's ability to pay. In theEastern District of Michigan, a plan typically will pay the general unsecured creditors noless than 10 cents on the dollar. The plan must be feasible in light of income andexpenses and must be proposed in good faith.

Are there limits tow

hat a chapter 13 debtor can claim as a reasonable expense?

Yes. In the Detroit district, debtors must generally cease 401(k) contributions as well as401(k) loan repayments while in chapter 13. Expenses such as high car payments, jet-ski payments, motorcycle payments, private school tuition, assistance to adult childrenmay not be allowed as these may be considered luxury items by the Trustee andobjected to unless you are offering 100% to your unsecured (credit card, medical bills,etc.) over 36 months. Charitable contributions (including tithes and offerings) willgenerally be allowed if the debtor in fact makes these contributions (the Trustee maywish to see proof such as a letter from your Church, Temple or whatever charity youcontribute to).

Is it necessary to go to court when filing for bankruptcy?

Not typically, but all debtors must appear at the meeting of creditors (also known as a"341 meeting") 20-40 days after their petition is filed. While this is not a BankruptcyCourt hearing (i.e. the Judge will not be there) it is a required proceeding pursuant tothe Bankruptcy Code-you must attend. Failure to attend will result in the Trustee filing amotion to dismiss your case. At the meeting, a trustee will ask the debtor about theirpetition, schedules and Statement of Financial Affairs. Such meetings are often routineand short. If the debtor has retained an attorney, then the attorney will appear with thedebtor as legal counsel. Creditors may ask the debtor questions at the meeting, butusually do not attend. The creditors meetings in Detroit are held at 211 West FortStreet, Detroit MI 48226 in the basement, Suite B100. The building is on the corner ofFort Street and Washington, Downtown.

What if a debtor has filed for bankruptcy previously?


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A debtor may not be eligible to file a petition if, within the preceding 180 days, hevoluntarily dismissed a bankruptcy case after a Relief from Stay motion was filed or ifthe debtor failed to appear in a bankruptcy case. If a chapter 13 case was dismissed forfailure to make the monthly payments then it can generally be re-filed without delay butit is generally helpful to show a positive change of circumstances that has occurred

since the previous dismissal. No chapter 7 discharge will be granted where a priordischarge was granted within the past 6 years.

Do spouses have to file for bankruptcy together?

No, spouses may file jointly or individually. It is quite common for just one spouse tofile in order to preserve the credit standing of the non-filing spouse, especially if theother spouse has OK credit.

What effect does bankruptcy have on a co-debtor or co-signer?

A non-filing co-debtor remains liable just as before (i.e. they are not filing bankruptcy).However, a filing debtor may be able to protect the non-filing co-debtor by filing a

chapter 13. In any event, a notation that the account was included in a bankruptcy willlikely appear on the co-debtors credit report which may damage their credit standing.That is simply the risk one takes when signing a contract with a co-signer.

Are there debts that bankruptcy will not dispose of?

Y

es. In chapter 13, some non-dischargeable debts include: (1) long-term debt whichby the terms of the underlying contract, is payable at least in part after the last paymentis due under the chapter 13 plan; (2) money owed for alimony, maintenance or support;(3) most student loans; (4) debt for death or personal injury arising from driving underthe influence; (5) criminal fines and restitution.

In chapter 7, non-dischargeable debts include: (1) money owed for child support oralimony; (2) certain taxes; (3) some debts not listed on certain bankruptcy petitions; (4)debts incurred through fraud; (5) debts resulting from "willful and malicious" harm; (6)defalcation of fiduciary duty; (7) student loans unless the court decides that paymentwould be an undue hardship; (8) mortgages and certain liens (such as on a car) which

are not paid in the bankruptcy case; (9) government fines, forfeitures, and restitution;(10) debt arising from driving under the influence; (11) debt incurred to pay a non-dischargeable federal tax.

What if a debtor accidentally forget to schedule a creditor?

In a "no-asset" chapter 7 where the creditor alleges no fraud, willful or malicious injury,or defalcation of fiduciary duty, the debt is still discharged.


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Can a chapter 7 debtor own anything after bankruptcy?

Yes. A chapter 7 debtor may keep exempt property (property protected from creditors)and property obtained after the bankruptcy is filed. However, if a debtor receives an

inheritance, a property settlement, or life insurance benefits within 180 days after filing,that money or property may have to be paid to the creditors (through the trustee) if theproperty or money is not exempt. You should immediately notify your attorney and theChapter 7 Trustee should this happen to you. Do not dispose of any property youacquire via any of the above within the 6 months after filing.

What is equity?

Equity is determined by deducting the amount of a secured creditor's lien from the fair

market value of the asset. (e.g. a car that is valued at $10,000 with a $9,000 lienagainst it, has $1,000 in equity).

What if all of the debtor's assets are exempt?

This is a common occurrence and is referred to as a "no-asset" case. This means thatthe Trustee has not found any property that can be sold to raise cash for the benefit ofyour creditors. Almost all Chapter 7 cases are no-asset cases. I will do a thoroughanalysis prior to filing and let you know the likelihood if your case is an asset case.

What if a debtorwants to retain non-exempt assets?

A chapter 13 should be considered. However, it should be noted that even thoughsome assets may exceed the allowable exemption level, the chapter 7 trustee may electto abandon the asset back to the debtor if the liquidation of the asset would yield aninsignificant amount of money. Also, chapter 7 debtors may be afforded the opportunityto compensate the bankruptcy estate (pay the Trustee the value with the BankruptcyCourts approval) for the un-exempt portion of an asset in order to avoid liquidation.

Should a debtor sell non-exempt assets in order to purchase exempt assets priorto a bankruptcy?

This is a form of exemption planning. Exemption planning is not prohibited per se, butproblems can arise. A debtor would be advised to consult an attorney prior toproceeding.


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Should a debtor seek to protect non-exempt property by transferring it to friendsor relations prior to bankruptcy?

No. The transfer could be deemed a fraudulent conveyance or a preference. Thetrustee has the power to avoid pre-petition fraudulent conveyances. Furthermore, such

transfers may result in a denial of the debtor's discharge if bad faith or concealment isproven.

What if a lien has been filed against a debtor's assets?

A debtor may avoid the fixing of a lien which impairs an exemption if the lien is: 1. ajudicial lien (except arising from alimony or child support); or 2. a non-possessory, non-purchase money security interest in: (a) household furnishings, household goods,wearing apparel, appliances, books, animals, crops, musical instruments or jewelry heldprimarily for the personal, family, or house hold use of the debtor or dependent of the

debtor; (b) implements, professional books or tools of the trade of the debtor or of thetrade of a dependent of the debtor; or (c) professionally prescribed health aids for thedebtor or a dependent of the debtor.

What happens to secured property in a chapter 7 case?

A debtor must file a statement of his intention to either retain or surrender the propertywithin 30 days of the date of filing. Should the debtor choose to retain the property thanhe must either (1) reaffirm the debt with the creditor; (2) redeem the property by payingthe creditor the wholesale value of the collateral (only available with tangible personal

property); or (3) keep the contractual payments current. Because it is not usually in thedebtor's best interest to reaffirm a debt and because a creditor is not obligated toreaffirm, it is preferable for a debtor to have payments current on secured debts whenfiling for bankruptcy.

Will bankruptcy stop calls from bill collectors, repossessions, foreclosures,evictions, lawsuits, judgments, orwage attachments?

Yes. Under the "automatic stay", all collection efforts must immediately stop. Thecreditors are usually notified within two weeks of filing although they can be notified

quicker if necessary.

Can a bankruptcy be filed simply to delay a creditor?

Though some debtors do this, it is an improper purpose for filing a petition. ABankruptcy petition should only be filed in good faith, not simply to frustrate a creditor.


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How much does it cost to file for bankruptcy?

At this writing, the court filing fees for chapter 7 are $200. The court filing fees forchapter 13 are $185. My attorney fee ranges from is $400-$800 for a typical chapter

7case and at lease one-half must be paid prior to the case being filed. For a chapter13, I charge a total of $1,400 of which I typically require $300 in addition to the courtfiling fee to be paid up front. The remaining fee (typically $1,100) will be paid throughthe plan (out of the money that the debtor pays to the chapter 13 trustee). I offer freeconsultations by phone or personally in my office.

Who interacts with the creditors and bill collectors after the bankruptcy petition isfiled?

Me, your attorney and my staff. You should direct all creditor calls to my office. Use my

local phone number as the toll free number only works within Michigan.

How long will a bankruptcy appear on a credit report?

A chapter 7 bankruptcy will appear on a credit record 10 years. A chapter 13bankruptcy will appear on a credit report for 7-10 years. Other negative items on acredit record will remain for 7 years.

After bankruptcy, can a debtor obtain credit?

Yes, although the decision will vary depending on the particular lender. Some lendersmay consider a more balanced debt/income ratio and an inability to obtain anotherchapter 7 discharge for the next 6 years to be plus factors in evaluating a prospectiveborrower. Other lenders will consider a bankruptcy a permanent indicator of poor

judgment. Other factors lenders might consider include: stability of employment and/orresidence; time elapsed since bankruptcy; and level of income. In general, if a debtorotherwise qualifies, two years after a discharge, Fannie Mae and Freddie Mac will nothold the bankruptcy against the debtor when attempting to obtain a low interestmortgage. Note that while in chapter 13 in the Eastern District of Michigan, a debtormust obtain permission before making purchases or obtaining loans which exceed

$1,000.00.

How can credit be reestablished following bankruptcy?

Common methods are to obtain a secured credit card and/or to obtain credit with thehelp of a cosigner.


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How can a credit report be obtained?

The three major credit reporting agencies are Equifax (800-685-1111), TransUnion(800-916-8800), and Experian (formerly TRW) (800-682-7654). I can obtain a credit

report for a prospective clients who comes for a consultation and has a need for it.Usually there is a need for a credit report where the debtor is may have lost track ofsome debts, creditors, judgments, etc.

What are some alternatives to bankruptcy?

The alternatives include: doing nothing, negotiating with creditors for extensions orcompromises, or going through credit counseling. Doing nothing may be appropriate asto debts that are small and/or where the debtor is elderly and "judgment proof" (noforeseeable consequence for unpaid debt). Creditors are also willing to settle on debts

for a percentage of the balance due (45-75% is common) once they become 90-120days delinquent. One problem with settling is that the entire amount may need to bepaid at once in one lump sum or in a brief span of time. There may also be taxconsequences as the forgiven debt is treated as income by the IRS (unless the taxpayeris insolvent). Credit counselors are funded by creditors and will set up a program to payback almost everything to the debtor's unsecured creditors. Often times a creditcounselor is able negotiate extensions, reduced interest rates, and forgiveness of latefees. The debtor's credit report may reflect that he is in credit counseling which mayhinder his ability to obtain credit. All other things being equal, it would be better to go toan established local credit counselor and not one over the internet or telephone. Aswith bankruptcy, the alternatives have positives and negatives which should be

considered in light of individual circumstances.

Will a debtor's family, friends, or employer find out about the bankruptcy filing?

Although the bankruptcy petition is a public record that is accessible from the Internet, itis unlikely that a person would find out unless that person is also a creditor. Currentemployers and government agencies cannot legally discriminate against a debtorbecause of a bankruptcy filing. Chapter 13 payments are commonly made throughpayroll deduction so the employer in that instance will learn of the filing.

How should a debtor prepare for bankruptcy?

A consultation with an attorney may be quite helpful. In any event a debtor shouldprobably: withdraw funds from any bank to whom he owes money to avoid a set-off;stop using credit cards, pay certain debts (e.g. utility bills, house payment, car payment,child support) and not pay other debts (e.g. credit cards and other dischargeable debt).


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Does a debtor have to list all his creditors and assets on the bankruptcy petition?

Yes. The failure to do so may result in a dismissal, a denial of discharge or perhapseven being charged with a bankruptcy crime. A debtor is not allowed to file against only

certain creditors. Even creditors who are family members or friends must be listed.

May debts owed to friends and family members be repaid?

Yes, a debtor may repay any or all of their debts after bankruptcy, but they are notlegally obligated to do so unless the debtor has signed a valid reaffirmation agreement.

I still have room on my credit card, should I "Max it out" before I file to take fulladvantage of the Bankruptcy discharge? Should I take out some cash advancesbefore I file?

This is not recommended before filing bankruptcy. The Bankruptcy Code does not allowfor a discharge of every debt. Certain types of debts and certain conduct of the debtorwill prevent a discharge of the debtor or a discharge of a particular debt. Section 523 ofthe Bankruptcy Code explains what debts cannot be discharged under chapter 7 (and13 in some cases). In particular, look at section 523(C):

(C) for purposes of subparagraph (A) of this paragraph, consumer debts owed to a singlecreditor and aggregating more than $1,000 for ''luxury goods or services''incurred by anindividual debtor on or within 60 days before the order for relief under this title, or cashadvances aggregating more than $1,000 that are extensions of consumer credit under an open

end credit plan obtained by an individual debtoron or within 60 days before the order for reliefunder this title, are presumed to be non-dischargeable; ''luxury goods or services'' do not includegoods or services reasonably acquired for the support or maintenance of the debtor or adependent of the debtor; an extension of consumer credit under an open end credit plan is to bedefined for purposes of this subparagraph as it is defined in the Consumer Credit Protection Act;

This means that if you take large cash advances within 60 days before you file, thesemay not be discharged. You may be stuck with the debt after the court cancels yourdebts. Furthermore, if it can be shown that you had no intent or present ability to pay thedebt (cash advances or your "running up" your credit card; i.e. buying a whole lot of stuffbefore you file knowing that there would be no way to pay), then the court could

consider it a fraud and disallow the discharge of that debt even though you are outsidethe 60 days. Be careful. Filing bankruptcy is not like winning the jackpot. Bankruptcy ismeant for honest debtors who honestly incurred debt. It is not meant for people wantingto make a quick killing in the consumer market or even for someone who really needsthe money but has no way to repay it.

What is the Bankruptcy Discharge and howwill the discharge affect me?


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If no objections are filed, you will receive a discharge in bankruptcy. The discharge"cancels" or "wipes out" certain debts that you had at the time the bankruptcy was filed.A bankruptcy discharge also has the following effects:

y It voids (cancels) any judgment determining personal liability on a debt; and

y It prohibits creditors from taking any action to collect a debt as a personal liabilityof yours.

However, if a debt is secured by a lien on any property belonging to you (e.g., a homemortgage or lien on a title to a vehicle), the discharge does not prevent the creditor fromrepossessing that property. Generally speaking, you must pay a secured debt accordingto its terms to avoid repossession.

Also, while a discharge relieves you of responsibility, it does not relieve anyone elsewho may be responsible with you on that debt, i.e., a cosigner or co maker. Therefore, if

your parent, friend, or relative cosigned on the loan papers, guess who that creditor willgo after? Right, your cosigner may be sued by the creditor, and that creditor does noteven have to wait until the case is over. This can be an embarrassing situation for bothparties. In a Chapter 13 case, your cosigner may be protected.

You will not be required to appear in court to get your discharge order. If the courtreceives no objections to your discharge, you can expect to receive an order in the mailin approximately three months after your creditor's meeting. When you receive thedischarge order, you should put it in a safe place with your other valuable and importantpapers because you may have to show it to creditors later. Please don't call the Courtclerk, the Trustee or my office trying to speed up the discharge process. Wait for the

court to mail it.

Are all my debts discharged by the court?

Most will be, however, there are exceptions. The next sections list these:

y Only debts owed from the period before the bankruptcy was filed will bedischarged. This bankruptcy discharge will not discharge debts that you becameobligated to pay during the bankruptcy. Your discharge will only cover yourpersonal obligation to pay debts. It will not cover cosigners on your debts and itwill have no effect on most security interests, like home mortgages and

encumbrances on motor vehicles.

Are there some debts that are never discharged?

Unfortunately, the answer is yes. The Bankruptcy Code specifies some debts that arenot discharged in your Bankruptcy. The list includes:

y Most income taxes (special rules apply)


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y Student loans, unless you file a complaint in bankruptcy court claiming and"undue hardship," i.e. very unusual and compelling circumstances (i.e. sodisabled you will never work again).

y Governmental fines and costs (parking tickets, traffic tickets, Court restitution).y Debts arising from a judgment against you as a result of your operation of a

motor vehicle while you were intoxicated causing death or personal injury toanother.y Consumer debts owed to a single creditor in an amount in excess of $1,000 for

luxury goods or services within 60 days of the date you file, or for cash advanceson your credit line aggregating more than $1,000 within 60 days of your filingdate.

y If a creditor files a complaint and proves that your debt to them arises from fraud,breach of fiduciary duty, larceny, embezzlement, defalcation or a material lie onan application for credit, a drunk driving accident restitution for damage youcaused, or for willful injuries you caused to another.

y Alimony, maintenance and support to a spouse, former spouse or a child.

What about property with liens on it? Is that debt also discharged?

Yes, but the lien remains; and it is still subject to seizure once the case is finished (seeabove). However, the following may be of interest to you:

y Certain liens (judgments, levies, non-purchase-money interests in householdgoods) can be eliminated entirely by asking the court to do so. There is anadditional fee for this service. If you are interested in this service, let me knowand I will quote such a fee.

y Other liens, like mortgages, motor vehicle encumbrances, and purchase money

security in other goods cannot be eliminated. If you want to keep the mortgagedhouse, encumbered vehicle, or secured item, you may have to enter into anagreement to pay a part of the debt (reaffirmation) or the value of securedconsumer debts (redemption).Usually you are better off just continuing to pay forthe secured item rather than signing a reaffirmation agreement.

y If you think any of these agreements or motions should be filed in your case, or ifyou want additional information, contact me. A creditor cannot be forced toreaffirm an obligation, but they may be forced into a redemption (where you paythe fair-market value of the security in one lump sum). Redemptions are rarebecause most people don't have the money. Remember, if you want to reaffirma debt, avoid a lien, or redeem property, you must do so before the dischargeorder is signed. I won't always sign a reaffirmation agreement unless I(personally) feel it is in your best interest.

Note: You can pay anybody you want after your discharge, however, few debtors do. Itis important that you know the significance of your discharge order. If a debt isdischarged, that creditor cannot force you to pay that particular debt. This means thatthe creditors cannot legally file an action against you (for that debt), continue an action


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they had filed before the bankruptcy, send you collection letters or harass you in anyother way.

Do the automatic stay provisions of the Bankruptcy Code protect money I have inthe bank, or is it seized by the court?

Money in the bank may or may not be taken by the trustee, depending on thebankruptcy exemptions claimed. Your exemptions may be either federal or state.Ordinarily, the trustee is the only party that can seize your account once you have filedyour bankruptcy case with the court; however, there is one important exception. If youhave an account in a bank, credit union, savings and loan or other financial institution towhich you alsoowe money, that institution mayrefusetoreleaseaccountfunds toyouonce you have filed bankruptcy. This right of set-off is most commonly used by CreditUnions where you may be a member. This is a very important, and often overlookedaspect that must be considered prior to filing. By the way, there is nothing that preventsa debtor from simply closing an account before he or she files a bankruptcy case.

Are there any circumstances where I could make myself liable on a debt after mydischarge?

Yes. Such circumstances occur when the debtor signs a reaffirmation agreement.Reaffirmation agreements are legally binding contracts between the debtor and acreditor wherein the debtor agrees to be liable once again to the creditor after the entryof the discharge order. Such agreements must always be approved by the court. Thisapproval is necessary to discourage unscrupulous creditors from coercing a debtor tobecome liable to the creditor after the debtor has been discharged (which legallycancels indebtedness). The court usually discourages reaffirmation agreements, except

for good cause.A

fter all, these are generally the same debts that got the debtor intotrouble in the first place. Reaffirmation agreements:

y must be voluntary;y must not place too heavy a burden on you or your family;y must be in your best interests; andy can be canceled anytime before the Court issues your discharge or within 60

days after the agreement is filed with the Court, whichever gives you the mosttime.

If you are an individual and not represented by an attorney, the Court must hold ahearing to decide whether to approve the agreement. The agreement will not be legallybinding until the Court approves it. If you reaffirm a debt, which the Court approves andfail to pay it, it is the same as if you never filed bankruptcy respecting that debt (yourother debts are still discharged). This means the creditor can sue you and take yourproperty! This is not a good position to be in!

What is a trustee, and who will be appointed?


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After a bankruptcy case is filed, the court appoints a trustee. The trustee has manyfunctions, but primarily, he is appointed to examine your case, as well as the debtor,orally, to determine whether there would be any assets available for creditors. Mostpeople can take the necessary exemptions to protect their property from their creditorsand the trustee, who, after his examination makes a determination as to whether he will

take physical possession of, orabando

n (return legal control) to the debtor. In the vastmajority of cases, the trustee will abandon all property to the debtor. Rarely will thetrustee take actual possession of property in a consumer case. However, if a debtorowns a valuable piece of non-exempt property, the trustee will take the item and exposeit to public sale for the benefit of creditor.

Can I just list and discharge the debts I want and keep the "good debts."

No. All debts must be listed. Even debts to people you like, or feel a special obligation.After the case is discharged, nothing prevents youfrom payinganyoneatall. If you failto list a creditor, you chances of a discharge are decreased and they are eliminated for

the debt you did not list.

I need a credit card. Can I keep one?

Possibly, if you do not owe any money to the creditor issuing the credit card, however,the trustee may demand that you cut up all your credit cards. Once you have made thedecision to file bankruptcy, you should not charge anything on any credit cards that youwill seek to discharge in your bankruptcy.

Once I file a Chapter 7, what if I need to do it again? Is there a limit to my re-filing?

Once you receive your discharge in a chapter 7 case, you cannot file anotherbankruptcy and get another discharge, in a chapter 7 case unless sixyears havepassed between the date this bankruptcy was filed and the date on which the newbankruptcy (chapter 7) is filed. This does not mean you cannot file for relief underChapter 13 of the Bankruptcy Code, also known as a "Wage EarnerPlan." You mayindeed obtain substantial assistance through a Wage EarnerPlan under Chapter 13.

This information sheet is intended as a summary of certain points only. The terms usedin this information sheet are intended to be simple so that they can be understood, thelaw is much more detailed. This information therefore is not "the law" and is designed

only to help you understand basic bankruptcy concepts. Each bankruptcy is unique.Your case may have special facts making further discussion necessary. Feel free toraise any issue if you feel uneasy or unsure about it.

How can I hire you as my attorney to file a Chapter 7?

Can I plan my bankruptcy?


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Of course! Good planning is why you are reading my website and hopefully will hire agood attorney. Pre-bankruptcy exemption planning (converting non-exempt assets suchas cash to exempt assets such as a car )is allowed so long as it is in good faith and fulldisclosure is made to the Court and Trustee via your bankruptcy petition, statement offinancial affairs and schedules.

Which bankruptcy is right for me: Chapter 13 or Chapter 7?

Many people file botha Chapter 7 to get rid of unsecured debts and then a Chapter13 to stop a foreclosure or repossession. A Chapter 13 is like a bill consolidation loan,and you normally file it to keep property. A Chapter 7 is used to completely wipe outunsecured debts and to get rid of secured debts for property you don't want to keep.Both will stop garnishments and Creditor harassment. Over 50% of all Chapter 13cases fail because they become unaffordable. By filing a Chapter 7 first, you get rid ofthe unsecured debts and make your Chapter 13 repayment less. YourAttorney maywant to file a Chapter 13 because he will earn more than he would in a Chapter 7, but

you will usually profit far more from filing a Chapter 7. Usually, the only times you willwant to file a Chapter 13 are 1) when you have already filed a Chapter 7 and can't fileanother one or 2) if you have so much property and equity that a Chapter 13 isnecessary to keep that property, or 3) you are facing an imminent home foreclosure orautomobile repossession.

You may also have to file a Chapter 13 if you have so much income (after you pay yournormal monthly living expenses) that you can repay your debts within 5 years. AChapter 13 may also be used for special purposes, such as to discharge special taxdebts, repay child support, repay student loans, or protect a co-signer. The fortunatething about virtually all Chapter 7 cases is that the Debtor's assets are normally exempt,

so there are rarely any assets to liquidate (sell and convert to cash for benefit ofcreditors).

Why file a Chapter 7?

If you have substantial unsecured debts you may want to file a Chapter 7. You mayalso want to file a Chapter 7 if you want to surrender property and not owe for it. Youcan usually keep all your property in a Chapter 7, because you won't have enoughequity in any property to exceed the exemptions allowed.

Why file a Chapter 13?

You may want to file a Chapter 13 if you have secured debts and are threatened withforeclosure or repossession, if you filed a Chapter 7 less than 6 years ago, if you wish toprotect your cosigner, or if you have debts that are not dischargeable in a Chapter 7 butare payable in a Chapter 13.

Can I convert from a Chapter 13 to a 7 or from a 7 to a 13?


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Few people convert from a 7 to a 13. You have more than a 90% chance that you willhave to convert from a 13 to a 7. Over 5 years, you are very likely to miss a paymentand have the Chapter 13 dismissed (or have to re-file). The vast majority of Chapter 13cases are never finished and are converted into Chapter 7 cases or dismissed outrightby yourself the debtor, the Trustee or one of the creditors having filed a motion to

dismiss. If you are close to completing the plan, you may be granted a hardshipdischarge.

What is a Chapter 20? What is a Chapter 26?

Some people file a Chapter 7 to wipe out unsecured debts and then file a Chapter 13 tokeep their property. This is jokingly referred to as a "Chapter 20". Filing a "Chapter 20"can be the intelligent and affordable way to file a Chapter 13. Filing a Chapter 7 andthen a Chapter 13 to obtain the benefits of both is very effective. You must, howevershow that there has been a change in circumstances between the filing of your Chapter7 and the subsequent Chapter 13 and you must be filing in good faith (i.e. without trying

to "play the system").

A "Chapter 26" refers to filing back-to-back Chapter 13 cases. You would do this to paydebts that can't be paid in 5 years by just one Chapter 13. In a sense, you are"extending" your repayment time by filing two Chapter 13s. The Bankruptcy Court willfrown on multiple bankruptcies filed repeatedly without making a viable effort atrepayment.

If a Chapter 7 or Chapter 13 alone won't work for you, a 20 or 26 normally will.

How long will bankruptcy take?

It will take about 3 to 4 months for a Chapter 7 to be final. (You will get a letter within 10days of filing, telling you the time and date of the 341 hearing. This hearing will be heldabout 4 to 6 weeks after you file.) A Chapter 13 will take as long as the repayment plantakes the normal plan is between 3 to 5 years. By statute (the Bankruptcy Code), aChapter 13 plan may not exceed 60 months-5 years.

What are the most common mistakes I can make when filing?

Not showing up for your hearing and not listing all of your assets and liabilities ordebts. Fail to show up at the hearing, and your case is dismissed. The best policy is to

list all your debts and assets.A

lways list every debt, even if you think it is non-dischargeable, it may be discharged anyway. Even include last month's utilities in yourdebts.

How do I qualify for bankruptcy? Can I not be approved?

You qualify for bankruptcy if either your reasonable monthly income exceeds yourincome or your liabilities exceed your assets. If you don't qualify, I will tell you when I


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consult with you or when I prepare your bankruptcy. It is very rare not to qualify. Youbasically have to be a resident of the Eastern District of Michigan (Detroit area) for atleast 6 months, reside in the state you file in, and not have filed within certain timeperiods (i.e., you can't file two Chapter 7s within 6 years of each other).

What if the Court does not approve my Chapter 13 or Chapter 7?

If there is anything wrong with your Chapter 13 or Chapter 7 bankruptcy it will usuallybe changed and amended. Of course, it is less costly and time-consuming to do it rightthe first time. If you earn so much money that you can afford a Chapter 13, you will beforced to change it from a Chapter 7 to a Chapter 13.

How often can I file?

You can file a Chapter 7 six years after your last discharge from a Chapter 7. The timeis measured from the time of discharge of your first case to the time of filing of your

second case.Y

ou can file Chapter 13s as often as needed, but you must be finishedwith any prior case. You can only have one bankruptcy going on at a time.

If I file does it mean my old bad debts are erased from my credit report?

NO! What is reported is that you had a debt and that a bankruptcy was filed.Bankruptcy does not give you a good credit record or "repair" your credit recordautomatically. You repair your credit by paying your debts on time after the bankruptcy.Many credit card companies will send you pre-approved credit card applications and carfinancing offers shortly after getting your discharge. Beware of these offers, use thecredit carefully and you may be re-establishing yourself.

Can I file without an Attorney?

Yes. You can file a bankruptcy yourself, and this is called "filing pro se". You can alsodo dentistry on yourself, but we wouldn't recommend it. Doing your own case is a verybad idea. This website alone won't give you the knowledge you need to do it, but it willhelp you educate yourself so you can protect yourself from bad legal advice or anincompetent Attorney.

As an example, if you file a reaffirmation, it usually must be approved in a hearing bythe Judge, and that will mean extra hearings and time for you. Considering the time

and risk involved, we highly recommend you use anA

ttorney.Y

ou may lose far more inCourt than what the Attorney would have costplus there may be extra time and efforton your part. Most people who initially file their case on their own eventually need to hirean attorney to clean up their mess. I often charge more to clean-up a poorly filed do-it-yourself bankruptcy than a new case since it is less time consuming for me to do it rightthe first time than clean-up a mess.

What about a BankruptcyMill?


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Filing a bankruptcy through a Bankruptcy Mill or paralegal may be even worse thandoing it yourself. Many people have lost thousands of dollars with thesebusinessesthrough intentional scams or just plain bad work. Beware of personscoming to your house if it is in foreclosure. These people are scam artists and likevultures circling over an animal dying in the desert, are trying to capitalize on your

present desperate situation. Non-Attorney bankruptcy petition preparers are barred bylaw from providing you with any legal advice, however they often violate this law, oftento the detriment of the person filing. In enacting legislation governing bankruptcypetition preparers, Congress stated: "These preparers lack the necessary legal trainingand ethics regulation to provide [legal advice and legal services] in an adequate andappropriate manner. These services may take unfair advantage of persons who areignorant of their rights both inside and outside the bankruptcy system."

The bankruptcy petition preparer's role is limited by law solely to typing. Unlike anAttorney, a bankruptcy petition preparer can not help you understand the law, adviseyou on how to answer questions, assist you in planning, or assist you in Court. They

may be useful, but you must be prepared to do all the real work yourself. Federal lawrequires that bankruptcy petition preparers sign any documents they prepare; print onthe document their name, address, and social security number; and furnish you with acopy of the document. A bankruptcy petition preparer may not sign any document onyour behalf, may not use the word "legal" or any similar term in any advertisement, andmay not receive any payment from you for Court fees. The bankruptcy petition prepareris also required to disclose to the Court the amount of any fee you pay. Beware of anybankruptcy petition preparer who does not comply with these requirements.

What paperwork do I need to bring to my Attorney?

Bring the names, amounts, and proper addresses of all of your Creditors. Bring recentpay-stubs, tax returns, car titles, deed to your house and other real property, appraisalor property tax bill for your house and your most recent mortgage balance statement.You may estimate the amounts of any bills you owe, you don't need to call the creditorasking for the specific amount you owe. It also helps to have the account numbers, butwe must at least have perfect addresses to give notice to the Creditors. I have acomputer database of addresses to common creditors such as credit card companies,local hospitals, collection agencies and attorneys and the local utility companies. Creditbureau reports normally don't have the addresses on them. If you have gotten a Creditbureau report before filing, bring this with you and I will get the addresses for you.

How can I get a copy of my credit report?

You can get a free credit report if you have been denied credit, are unemployed, are avictim of fraud. To get one free (if you qualify) or for a small fee (if you don't) withoutgoing through a "middle man" just contact any of the 3 major reporting services below.They will typically charge $9 to $10. If you have recently been denied credit, you will be

able to get a free copy of your credit report. This website has a link to obtaining you


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report from Experian (the one I recommend). You could also go directly towww.experian.com.

1. Experian (TRW) at 1 888 EXPERIAN (1 888 397 3742) allows you to charge yourcredit report to yourVisa or MasterCard or debit card over the phone or on the internet.

2. Trans Union at 1-800-888-4213 or write to: Trans Union Corporation ConsumerDisclosure Center, P.O. Box 390, Springfield, PA 19064-0390

3. Equifax at 1-800-685-1111 or write to: Equifax Information Service CenterP.O. Box740241 Atlanta, GA 30374-0241. For $9, you can get an immediate report online fromEquifax at: http://equifax.com/resources/fcra_info_rights.html

If you decide to write to any of these services, be sure to include your: name, address,phone number, previous addresses for the past two years, social security number, birthdate, employer, signatureand be sure to include your payment. (You'll have to call to

get the payment amount.)P

roof of identity such as a photo copy of your driver's licensewill also be required. For your convenience, there is a credit report request form inSection 20.14 of this manual.

Can I file jointly with my spouse? Does my spouse have to file or sign if I want tofile individually?

Yes, you can file jointly. No, your spouse doesn't have to file but, if most of your debtsare joint debts, he or she may want to. In some cases, where only one spouse hasdebts or one spouse has debts that are not dischargeable, it might be advisable to haveonly one spouse file. There is no need for a spouse to file if the debts are not in his or

her name. If you are filing a Chapter 7, and the bills are also in your spouse's name, heor she generally should file to be protected. (Co-signers are protected in a 13, but arenot in a Chapter 7.) There should be no additional charge for a spouse filing, but somefirms do charge extra. The only extra work to do in a joint filing is adding an additionalname and social security number to the petition. There is no reason we can think of foryour spouse to file a separate petitionit will only cost you a second Court filing fee andAttorney fee.

Will it affect my spouse's credit?

Is he/she responsible for my credit cards if he/she is an authorized user? No, filing will

not affect your spouse's individual credit, but if he or she is a co-signer on any debt thatis not paid that will affect him or her. The fact that you filed bankruptcy does not appearon a spouse's credit report unless he or she also files bankruptcy.

Unless your wife has signed to be legally responsible, she is not responsible. However,many credit card companies will argue that she is responsible. They may even put a"no pay" on her credit report if the amount is unpaid; however, she may ask anyreporting service to correct that. If she does so, the credit card company will have to


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show that she signed for it. If they can't, it will be removed from her credit report file. Inother words, the credit card collectors may try to collect from her by claiming she isliable, but she really is not. If they damage her credit record, it may be grounds for alawsuit. Credit is normally granted based on a score from your past payment history,the amount of debt that you owe, the length of time you have been repaying present

credit, if you have opened credit recently, and the types of credit accounts you have.

Will my co-signers be protected?

Co-signers are protected only in a Chapter 13 to the extent that the plan pays the fullamount of the co-signed debt. If the plan pays the debt completely, the co-signer isprotected, but it will be listed in his or her credit record as being paid late. The Creditormay ask the cosigner for any remaining portion of the debt if it not paid completely. In aChapter 7, the co-signer will have some small protection regarding the collateral duringthe proceeding, but only because the Creditor can't go against the property of theestate. After a Chapter 7 is over, the Creditor will proceed against the co-signer

personally.

Can I file a personal bankruptcy and not have it affect my business?

If you own your own business, the business is a part of your assets. If it is worth verymuch, it may be property of the Court. If your business is incorporated and filesbankruptcy, it won't affect you because the business does not own you.

Can Bankruptcy stop foreclosures, wage assignments, help me get my licenseback from an uninsured accident, stop evictions, a judgment, and remove a lien?Yes.

What will happen to my bills?

When you file a bankruptcy, a Court order goes into effect that keeps Creditors fromlegally collecting from you. When you are discharged (i.e., the bankruptcy is final), theCreditor "charges off" the debt and gets a tax deduction for the loss. The bill is not paid,and the debt shows up as a bankruptcy charge-off on your credit report. SomeCreditors will attempt to get around the law and will continue attempts to collect after thebankruptcy is filed. They can be sued for this, but you need to prove they did it. One ofthe best methods is to record their call and then surprise them in Court with it when theydeny ever making the call. Most Creditors that ignore the law will never send you letters

or anything on paper after you file, but they may make phone calls hoping that you willpay anyway.

What if I keep getting bills?

You will continue to get some bills from bankrupted debts after you file. What happensis that the Bankruptcy Court sends out notices to the addresses that you give to them(that is why correct addresses are so important), but some Creditors never get these


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notices and continue to bill you or maybe you listed the original creditor and thataccount has been sold or transferred to a collection agency or attorney. You shouldmake copies of your original hearing notice (Notice of Commencement of Bankruptcy).If you get a bill or other dunning letter from a Creditor, send them a copy of the bill andthe notice. Some Creditors will continue to send bills even if they receive notice. It may

be that their computer can't stop sending out the bills, or they may simply be ignoringthe stay hoping that you will pay anyway. If this becomes a problem, and you haveproof that a Creditor is doing this on purpose, contact my office.

Do I have to pay my bills during the Chapter 7 or 13?

No. Don't pay any bill (except a home or car note you wish to keep and your post-filingutilities) until after you file a reaffirmation in a Chapter 7. Don't pay any payment in aChapter 13 unless it is the regular monthly mortgage payment or car payment, and the13 was filed to catch up the arrearage. A stay is a federal Court order to stop. If theitem is secured, your overdue payments will continue to add up while you don't pay on

the item. However, the Creditor can't proceed against the collateral until the stay isterminated. Often, the Creditor will file a motion to terminate the stay after thebankruptcy is filed. Bankruptcy stops your obligation to pay, but the Creditor may stillhave a lien and rights in the property. You often quit paying for items when you file sothat you have time to decide if you want to reaffirm, redeem, or surrender. I have rarelyever had a bank refuse to reaffirm a debt, but you don't want to make payments if theyaren't going to reaffirm with you and they only want the property. In some rare cases,with people who are never going to repay, the bank may refuse to reaffirm. In thesecases, the bank only wants the property back. Also, some credit unions may refuse toreaffirm a car or mortgage unless you also reaffirm their credit cards or other loans oraccounts you have with them. In cases like this, you may want to redeem (pay one

lump sum) the property instead. That is why you don't want to make any morepayments just before or after you file. You can take the time to negotiate your options.You don't have to be caught up on your payments to reaffirm, but some banks may

request itand all of them want it.

Who notifies the Creditors and bill collectors? After the bankruptcy petition is filed,the Court mails a notice to all the Creditors listed in the schedules. This usually takes 1-2 weeks.

Do I have to go to Court?

Not exactly, but you will have to attend a hearing presided over by the bankruptcyTrustee. This hearing is called the 341 Hearing (Meeting of Creditors). At this hearing,the Trustee (who is usually an Attorney) will ask questions of you, under oath, regardingthe content of your bankruptcy papers, assets, debts, and other matters. It is very muchlike a deposition, not like a trial. If you can't attend (example: if you are in the serviceoverseas), you may be allowed to have a family member or other next of kin testify onyour behalf. The Trustee is not the judge. He is there to take any assets from you, if he


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can, and to check the accuracy of your paperwork. The Trustee represents thecreditors, not you.

Where is my 341 hearing?

Your 341 hearing is always at the Federal Court closest to you.

In metro Detroit, your 341 hearing will be held in the basement at 211 West Fort Street,Downtown Detroit at the corner of Fort Street and Washington. Always give yourselfample time for parking.

What do I wear to the hearing?

The 341 meeting is a Federal Court proceeding so dress and act appropriately. Don'twear cut-offs or jeans with holes in them and don't wear sandals. Suits are notrequired, but dress properly for a hearing in Federal Court. Children are not supposed to

be in the hearing room. Do not borrow and wear flashy jewelry. This is not the time tobrag about how rich you are or how much you own. The Trustee is looking for assets totake from you. He is not your friend. He represents the persons that you owe. Youmust report in your bankruptcy papers everything that you own and it's real value, butdon't brag about your income and possessionsespecially if you don't have any. Savethat for when you want to impress the opposite sex in bars.

Do you show up with me at the hearing?

Of course! I will take care of you, and hold your hand through the process. I don't justfile the paperwork. However, there is some work that you must do on your own and, if

you read this manual thoroughly, you should be able to make the most of yourbankruptcy without too much help from us.

When should I file tax returns if I am going to file bankruptcy?

If I file in December do I keep my refund? If you are considering filing a bankruptcy, youshould file your tax return as early as possible. Get your refund before you file. If youdo, you will generally keep your refund no matter how much it is. If you file in January,you may have to wait for some time after you get your refund back. You will be askedwhen you got your refund and how you spent it if you got a large refund. Be sure to listany anticipated tax refund in your bankruptcy papers so that I may exempt it if possible.

What will happen to my house and car?

Usually, you keep them. If your equity is less than or equal to your exemption, youkeep the property. You are allowed to keep a certain amount of equity and property inbankruptcy. When I prepare your bankruptcy I will tell you if you are at risk of losingproperty. At the time of filing, all your property that is not exempt belongs to the Court.The idea is to exempt it all so that you keep it all.


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Do I have to keep up the insurance on my vehicle?

Will my rates be affected or will I be dropped? In Michigan, the law requires you to havePLPD or No-fault insurance at a minimum. PLPD stands for personal liability andproperty damage insurance. If you are financing or leasing a motor vehicle, your

financing contract will more than likely require you to maintain full-coverage insurance.This protects the finance company (lien-holder) in case the vehicle is in an accident orstolen. If you fail to keep full coverage insurance on your vehicle and it lapses, theCreditor may petition the Court to get relief from the Bankruptcy stay to allow them topick-up your vehicle-they will argue that you may get in an accident or it may be stolenand you could just walk away from it-with them taking the loss. Most insurancecompanies are happy to keep you if you simply pay on time and have few claims. Wecan generally say that if you pay your premiums on time and keep the same company,probably nothing will happen. However, this may be a good time to compare rates withother companiesespecially if you fear you may be dropped or raised because youlisted your insurance company as a debt (or if you are bankrupting an accident claim).

Can a Creditor be forced into a reaffirmation?

No, a Creditor can't be forced into a reaffirmation. Can a Creditor be forced intoredemption (a lump sum payment for fair-market value)? Yes, a Creditor can be forcedinto redemption.

A reaffirmation is an agreement to pay the payments on the loan, and it is very rare forthe Creditor to refuse a reaffirmation. If the bank does not agree to a reaffirmation, itwill usually take a large loss from selling the vehicle at an auction, or the house in aforeclosure. It may even violate federal lending rules by refusing to reaffirm on a home

mortgage.A

bank may be able foreclose or repossess, regardless of whether you arein a bankruptcy. If they have started a foreclosure, the filing of the bankruptcy stops theforeclosure but, in a Chapter 7, the bank may file a motion with the Bankruptcy Courtand ask to foreclose anyway. If a Chapter 13 offers a good repayment plan, the Courtwill not approve any foreclosure. If the bank is adamant that it wants the house or carback, it may do so in a Chapter 7 and take a loss. Normally, the bank will rethink theirdecision and give you one more chance through reaffirmation, but no one can forcethem to reaffirm.

A redemption is an agreement to pay the bank what the security is worth in one lumpsum. They cannot refuse the redemption. If you wish to redeem a car by paying a lump

sum, contact my office.

Can I choose which Creditors I repay?

Yes, you can reaffirm to pay one Creditor, but not another, after the bankruptcy. Bydoing this, you can keep one car, but not another, or keep a credit card, but let a lemonauto go back. A Creditor will have to agree to the reaffirmation, but few refuse. Ofcourse, we highly recommend you don't reaffirm unsecured debts.


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Can I revoke my reaffirmation?

Yes, but it must be revoked or rescinded within 60 days of the 341 hearing or beforedischarge, whichever comes first. It should be revoked in writing and sent by certifiedmail so you have proof. Or you could retain me to do it for you and I will file the

rescission with the Bankruptcy Court and docket a copy in your official court file.

I want my house or car to go back. Will I lose it immediately?

No. You will normally have until the 341 hearing or a couple months thereafter toreturn your car and owe nothing until then. Use that period of time to look for anothervehicle you can afford.

If you choose to let your house go back, you will normally have about a year to live in itrent free. The shortest period for a foreclosure is about 6 months, and I have seen ittake up to 2 years. Remember, a repossession will normally do a lot more damage to

your credit than a bankruptcy. Filing a Chapter 13 to catch up on your payments (within2 years) is one way to keep your home. The only good reasons to let your house goback are that you have a large amount of negative equity in it or that it is anoverwhelming burden.

Will I lose my 401(k) or retirement fund?

No, your retirement is completely exempt and protected under both Michigan (state)and Federal (United States) law. Other states have other exemptions to protectretirement plans. However, you should talk to a qualified Attorney to get his opinion.The United States Supreme Court has held that pension plans, 401(k) plans, and other

"ERISA

-qualified plans" are generally excluded from the Bankruptcy Estate under 11U.S.C. sec. 541(c)(2). Unlike 401(k) plans, IRA accounts are not ERISA-qualifiedplans. However, in Michigan and most other states, an IRA may be excluded from theBankruptcy Estate or otherwise exempt because of a state statute. Some BankruptcyCourt judges have held that an IRA may be partially exempt under 11 U.S.C. sec.522(d)(10)(E).

Iwas just sued and they have just attached my paycheck or bank account whatcan I do?

If property was taken from you just before filing bankruptcy, and it was over $600, the

creditor can sometimes be forced to give it back. I will charge a fee of 50% of theamount I am able to recover from the creditor, if any. Liens on property that were froma lawsuit can be removed. Garnishments and foreclosures can be stopped. Thesooner you seek help, the sooner you can stop the procedure. It is important to seekhelp as quickly as possible.

What happens if I quit making my payments in a Chapter 13?


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Your Chapter 13 will be dismissed from Court, and you will go back to owing the originaldebt and being unprotected. However you should be able to re-file. In cases of multiplerepeat filings, however, the Court may dismiss the case with a 180 day bar (prohibition)to re-filing under any Chapter. This is rare and usually occurs when it is obvious to theCourt that you are abusing the privilege that a Chapter 13 Bankruptcy offers.

Can I reduce my monthly credit card or automobile payments in a Chapter 13?

Yes, a Chapter 13 can reduce your monthly credit card and automobile payments. Itcan also reduce your interest rates to 12%, 10%, or even 0% on tax, secured, andunsecured debts. Note that you cannot force your mortgage company to take less permonth than the normal monthly payment in your mortgage. You can, however, pay thearrearage (amount you are behind) over 36 months at 0% interest.

Do I have to pay back 100% ofwhat I owe in a Chapter 13?

No.Y

ou can repay as little as 10% to your Creditors in a Chapter 13. The amount youpay to your unsecured creditors depends on your ability to pay (i.e. your net disposableincome vs. your reasonable monthly expenses). This is the "best interest of thecreditors" test. Your plan must be proposed in good faith, it must not be a disguisedChapter 7. The liquidation analysis requires you pay the amount, if any that yourcreditors would receive if your case had been filed under Chapter 7 and your estatewere liquidated. Your Chapter 13 must pay at least what a Chapter 7 would have paid.Certain plans may pay much less than 100% if that is all you can afford. The Trustee

likes to see a 100%, 36 month plan.

Can I pay some Creditors and not others in a Chapter 13?

In a Chapter 13, you can pay the secured Creditors more than the unsecured Creditorsand the priority debts differently than the secured Creditors. You can't (shouldn't)discriminate and pay one unsecured Creditor differently than other unsecured Creditors.

Should I try a Debt Counseling Service instead of filing bankruptcy?

How do Debt Counseling services work? "Debt Counseling Services" are often high-interest loan companies. Other times, they are agencies that pocket 10-40% of themonthly money that you pay to them as fees for their "counseling". Most of theseservices will combine your bills and send a partial payment to each bill that you owe.

Usually there best interest are not for you but for their ultimate client in many cases, thecredit card companies. Your credit will be listed by the credit card companies asdelinquent for sending in partial payments, and the reduced amounts sent in may noteven cover the interest that a debt charges. These "Counseling Services" are oftensimply rip-offs that pretend to be charities or helping agencies. They are not using thelaw to your advantage and have no real "power" to deal with your creditors. Filing aBankruptcy petition puts the ball in your Court.


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Many of the larger apartment complexes are owned by banks, and banks tend to