At www.AllLegalMatters.com, a Michigan debt relief law firm, we receive HUNDREDS of phone calls every week from people seeking information about bankruptcy for themselves and/or their business. Because filing bankruptcy in Michigan, whether it’s chapter 7, chapter 11, or chapter 13, is a very personal and sensitive subject, we insist that you meet with us face to face for a free consultation. We do not believe that your sensitive and personal financial matters should be discussed over the telephone with some stranger who you never net before. We also base our legal fees for bankruptcy on each particular case, because some cases are much simpler than others and therefore should not cost the same as a more complicated bankruptcy petition.
BEWARE of law firms or bankruptcy attorneys the quote you a price over the phone like you are at a McDonalds drive thru window. They are not telling you about the hidden costs, like filing fees, credit counseling fees, and additional legal fees that will arise if an adversary porceeding is filed. We do not believe in the “fast food” practice of law at our law firm; we believe in personalized service, individual attention, and efficient legal representation. The fees we charge are designed to suit your case, which is why we believe we are Michigan’s most affordable bankrupcy lawyers, especially for the level of service we provide. Many of the bankrupcy attorneys in Michigan will never take your calls, they will never meet with you, and your entire case will be handled by some random legal assitant or an associate attorney fresh out of law school. When “shopping” for a bankruptcy attorney to handle your case, keep that in mind
Here are some bankrupcy basics to help you understand the process of filing for bankrupcy in Michigan. Thank you for choosing Canu, Torrice & Zalewski, PLLC / CTZ Law for all your legal matters.
www.AllLegalMatters.com
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The attorneys at CTZ Law are experienced bankruptcy attorneys and debt-relief counselors. Filing bankruptcy may not be for everyone, but in this suffering Michigan economy when unemployment is at a record high rate, often times it is an honest and realistic solution to protect your assets, your home, and most importantly your family. The CTZ Law attorneys understand that choosing to file bankruptcy is not only very personal, but is quite frequently embarrassing. The attorneys at CTZ Law promise that they will make the bankruptcy process as pain-free as possible, and will prepare you for the procedural aspects of your case before they occur so that the anxiety is kept to a minimum.
Michigan Bankruptcy Basics
Certain basic concepts apply under both Chapter 7 and Chapter 13 Bankruptcy. Bankruptcy proceedings instituted under Chapter 7 of the Bankruptcy Code provide a “fresh start” for the debtor who can no longer afford to pay their debts, such as medical bills and credit card bills. When filing under Chapter 7, the debtor seeks to have each personal consumer debt forgiven without any form of repayment, while individuals who file under Chapter 13 continue making decreased payments to their creditors due to a sufficient income to maintain some form of reduced payment. Under this structure, the debtor prepares a plan with his or her attorney which takes into account all sources of income and estimated living expenses. The income that remains after living expenses are satisfied is then divided up among the creditors in a “plan” that must then be approved by them.
Both Chapter 7 and Chapter 13 bankruptcy cases are commenced by filing a petition with the Federal Bankruptcy Court. The petition must list all of your assets, liabilities and other information required under the code. You cannot pick and choose which creditors to include on the petition, but that doesn’t mean you cannot keep your home or vehicle, as will be explained later. All creditors must be listed. You may file as an individual or as husband and wife. Married couples do not have to file together if substantially all debts are solely in one spouse’s name.
Your creditors can force you into bankruptcy. This is called an involuntary proceeding. For the most part, involuntary proceedings are confined to business cases. Almost all consumer cases are filed voluntarily. Approximately 75% of the cases I file a Chapter 7 “wipe-out debt” cases, the other 25% are Chapter 13 “reorganization or repayment plans” in which the debtor (or husband and wife) make payments to a Chapter 13 Trustee for a 3 to 5 year time period. Most Chapter 13 cases I file are for debtors who are trying to prevent a foreclosure of their home or repossession of their vehicle. Some Chapter 13 cases are filed because the debtor’s are not eligible to file a Chapter 7 either because they have filed a prior Chapter 7 in the previous six year or they have too many assets or make too much money or because they could pay their creditors a good percentage of what they owe with a Chapter 13 plan without too much of a burden on their way of life. Some clients will file a Chapter 13 repayment plan even if they qualify for a Chapter 7 just because they want to pay their creditors. Both Chapter 7 and Chapter 13 will stop creditor action such as a foreclosure or sheriff’s sale, utility shut-off, vehicle repossession or wage garnishment. See below or link to my detailed frequently asked questions page for answers to more of your questions. Feel free to e-mail me, come in to see me for a free consultation or call me. bankruptcy
The filing of the petition invokes what is known as the “automatic stay.” This means that your creditors are immediately prevented from doing anything further to compel collection of a debt. The harassing calls, garnishment, law suits, foreclosures, repossession or shutting off of utility services are all stopped. The “stay” is designed to give you time to sort out your affairs free from the harassment of creditors.
In the petition, your debts are classified as either priority, secured or unsecured. Each is treated differently depending on which chapter is filed. Priority debts in consumer cases are usually limited to government tax liabilities and support obligations. Priority creditors have certain rights to payment over other creditors.
Secured debts are backed by property known as collateral, and typically consist of auto loans and mortgages. The creditor has a lien, or right to recover the property upon default. In most cases, liens attach to property by virtue of a written security agreement signed when the pledged property is purchased, or upon obtaining a loan.
Unsecured debts are almost everything else. They include credit cards, back utilities, medical bills, store charges and unsecured loans. Unsecured creditors do not have a lien or interest in your property. If you purchased certain property with a store charge or credit card, the seller cannot repossess that property on your default without a security agreement.
The process of deciding whether to file a bankruptcy proceeding often is very difficult indeed. Nobody wants to file bankruptcy, whether it be under Chapter 7 or Chapter 13 of the Bankruptcy Code. Bankruptcy is meant for the honest debtor, someone who has explored all alternatives. (see below) A bankruptcy may have adverse credit effects and there can be other undesirable ramifications. Well then, why should someone take this important step? The answer to that question, in my opinion, is that you should file only after considering the various possible alternatives. If none of these alternatives is feasible or practical for you, then filing a bankruptcy petition may be the most responsible step to take.
Did you know that Thomas Jefferson did not hesitate to utilize the United States Bankruptcy Laws. Thomas Jefferson. The third president of the United States. A statesman, diplomat, architect, author, inventor and farmer. Widely acknowledged as a genius and the smartest of all U.S. presidents. A man who gave vision to this country as one of its founding forefathers and leader of this country.
Why do I bring up Mr. Jefferson? Because he was almost constantly in debt. A whole lot of debt. Mr. Jefferson filed several bankruptcies in his lifetime; and, his debt was huge in comparison to most individuals’ bankruptcies today.
The point is, bankruptcy is nothing to be ashamed of. If a person with Mr. Jefferson’s credentials, aptitude and intelligence can get himself into situations, repeatedly, that require bankruptcy to solve, then it is certainly no negative reflection on you if you need to. Many famous and important people have exercised their right to file Bankruptcy including Willie Nelson, Jerry Lewis and former Treasury Secretary John Connelly.
Most people who file bankruptcy would much rather repay their debt if they could, and they must deal with their ingrained fear of bankruptcy, because misinformed societal attitudes have always looked upon bankruptcy debtors as cheats, criminals and irresponsible. Many clients insist upon telling me of their exemplary past credit history, even though it has little to do with their present predicament, and offers me no information necessary to help them now. I suspect the reason arises from a need to explain that their situation is different, because they are not cheats and criminals like others who may file.
The irony is that they really are just like most others who file. It is simply a myth to believe that most people who file bankruptcy could pay their debts if they chose. The fact is most bankruptcy debtors have sold valuable assets to repay debt, borrowed from friends and relatives, and have simply no other place to turn before looking to the bankruptcy code for debt relief.
The most common reasons for filing bankruptcy include loss of employment, insufficient medical insurance, divorce, or a failed business venture. Most recently, bankruptcy filings have been surging as a result of the unprecedented availability of high interest credit cards, which inevitably lead to a greater number of defaults when combined with any of the above problems.
The inability to keep current with bills as they become due causes stress that affects marriages, jobs and almost every aspect of life. Anyone who has suffered from a barrage of hostile telephone calls from bill collectors knows that something has to give. The bankruptcy laws have been enacted to provide a safety valve that gives honest people a fresh start, and helps them regain normal lives.
While there is little reason to feel happy about filing bankruptcy, you shouldn’t feel like a loser either. If you are going through a financial crisis you are not alone. Over a million people a year turn to the bankruptcy laws for debt relief. Statistics show that the cross section of individuals and couples filing bankruptcy mirror society as a whole by income, type of employment, home ownership and almost any other relevant category. In other words, anyone can find themselves in bankruptcy.
The bankruptcy laws are there for a reason. On the whole, they benefit both the debtors and creditors. It is of course important to be responsible for the debts you incur, but filing a bankruptcy IS an act of responsibility. It puts you in a position to move forward, to become productive once again, provides closure, and pays your creditors from your non-exempt assets (or by other means if the court so approves in a Chapter 13 or 11 context).
It is important to seriously explore bankruptcy as an alternative to struggling for years to no avail. There are many factors to consider before filing a bankruptcy, but one of them should not be a guilty conscience.
Warning Signs. In assessing whether or not you should seek some kind of debt relief, consider the following questions:
Do you ever use one form of credit, such as a credit card or debt consolidation loan, to make payments on other debt? Or to put it in Biblical terms “Robbing Peter to Pay Paul”?
Have you taken one or more cash advances greater than $500 in the past few months to pay living expenses such as everyday utility bills or even groceries?
Do you ever borrow from friends or family to meet regular expenses, such as food and utility bills?
Can you barely make the minimum required payment on credit cards or other debts?
Are you receiving harassing calls or letters from creditors or collection agencies?
Are you being sued (summons and complaint), or are your creditors threatening to sue you?
Are your wages being garnished, or are your creditors threatening a garnishment?
Are your financial problems impacting your health or relationships due to stress?
Do you owe two months salary or more on your credit cards?
Are you using one-quarter or more of your take-home income to pay credit card bills and personal loans (excluding mortgage payments)?
Are your revolving credit cards charged to the limit or maxed out?
Have you bounced more than one check in the past year?
Are you without cash reserves for a rainy day or emergency?
Are you behind on house (mortgage or rent) or auto payments?
Are your creditors threatening to take your car, house, or other property (foreclosure or repossession)?
Are you behind on your taxes or do you owe the IRS, State of Michigan or City of Detroit?
If you answered “yes” to one or more of the preceding questions, you should consider seeking some form of debt relief. Bankruptcy, of course, offers very effective debt relief, but there are possible alternatives to filing bankruptcy which shall be covered below.
Generally speaking, the chief alternatives to bankruptcy are some form of negotiation and settlement with one or more of your creditors, perhaps by making payments through a nonprofit credit counseling service. Anytime you are dealing with alternatives to bankruptcy, be sure that you do not “put all your eggs in one basket.” In other words, do not let a foreclosure sale occur or allow a judgment to be entered against you without first finding out your options under bankruptcy laws.
Nearly all large companies such as credit card issuers have limited or no resources for dealing with individual borrowers. Many of my clients relate to me that they have called and written to their creditors to attempt to work out a method of paying their debts. Most often, these people find that no matter how good their reason for wanting to work out their debts, and no matter how hard they try to pay their creditors what they can afford, the creditors simply will not “work” with them. This is because these creditors are vast bureaucracies that have no method and no personnel to deal with people on an individual basis. There are some limited exceptions, however. If your situation is like one of the following, you may want to try to work the problem out without filing bankruptcy:
- Deed in Lieu of foreclosure
If you have one mortgage on a home or other piece of real estate and you cannot sell the property and simply wish to relieve yourself of the mortgage obligation, it is possible that you can negotiate a “deed in lieu of foreclosure.” This is an agreement where you give the property to the creditor, who, in turn, releases you from the debt. This saves the mortgage company the cost of foreclosing against you and allows you to walk away from the debt without further responsibility. You can try to negotiate this on your own, or you can hire an attorney to do it for you. Generally, mortgage lenders will not agree to this arrangement unless there is some equity in the property or the property is at least worth the amount that is owed. The mortgage holder will not accept the property if there is any other debt on the property, such as a second mortgage or a judgment lien.
It is important to note automobile lenders most often will not release you from the debt upon surrender of the vehicle. You can expect that following the surrender, the vehicle lender will seek to collect the deficiency (the amount of the debt remaining after sale of the vehicle.)
- Re-amortization of Past-Due Mortgage Balance
If there is a good reason why you fell behind in payments (such as temporary job loss, illness, or injury), a mortgage holder will sometimes consider adjusting the mortgage so that the past due amount is added in to the total and the term of payments is extended (maybe they will put the payments at the end of the loan). The creditor will generally consider this only where your debt-to-income ratio is acceptable and there is no other mortgage debt that is in arrears.
- Negotiation of a Single Debt
If there is just one (or a few) old debts you are trying to “clean up” on your credit report, it is possible that the creditor or its collection agency will be willing to settle their debts with you for significantly less than the total amount that you owe. This is usually only true of older debts, which may have been bought from the original creditor by another company . Again, you can negotiate a settlement yourself, or hire an attorney to assist you and represent your interests. I usually don’t do this because I’ve found it to be of little help to my clients unless they can afford to pay the creditor right away with a lump sum of money such as after getting a tax refund. Bankruptcy is usually simpler, quicker, cheaper and easier on my clients mental health.
- Credit Counseling Services
Credit Counseling services can sometimes help, although most of my clients who have tried have failed and eventually just filed Bankruptcy. There are a number of nonprofit credit counseling services available in the yellow pages under “credit counseling.” These services negotiate with your creditors to the extent that they are able. Generally, they can negotiate more favorable terms only with unsecured creditors (debts for which there is no collateral), such as credit card issuers. The credit counseling service attempts to get your unsecured creditors to settle for less than the full amount of the debt that you owe, and also tries to get the creditors to give you a lower interest rate. Some credit card companies will agree to these types of terms so long as they are getting their payments through the credit counseling service. However, other creditors are simply unwilling to work with credit counseling services, and the credit counseling service has no way in which to force the creditors to work with it. To be sure that you are selecting a reputable firm, be sure to ask whether or not you will be held responsible for late charges or other fees if the service does not make their monthly distributions on time. You can also ask for references from current or former clients. Unfortunately Credit Counseling Agencies have no real POWER to deal with your creditors. When you file a bankruptcy the ball goes into your court.
- “Mortgage Assistance” Companies and other Scam Artists
Unfortunately, there are a growing number of companies that send advertisements to people with pending foreclosure actions. These “mortgage assistance” companies, who get your address from the court records, promise that they can stop your foreclosure and help you avoid a bankruptcy. Please be very careful of these companies. The vast majority of the time, these companies simply prey on people who are in a desperate situation, taking advantage of your desire to keep your home and “avoid bankruptcy.” Typically, the “mortgage assistance” company will require a payment (usually one or two month’s mortgage payments) and will promise to obtain another mortgage loan to pay off your existing loan or to negotiate with your mortgage company to stop the foreclosure. They will wait until just before (unfortunately sometimes AFTER) the foreclosure sale to tell you that they were not able to help you, and that you should see a bankruptcy attorney. At that point, sometimes it is too late. You will be referred to a lawyer who has a good “working relationship” with the company, to whom you will need to pay even more money.
If you choose to use one of these firms, be sure to ask for references of clients that for whom the company has been successful, and check these references. Also, do not put all of your hopes on this type of service until it is too late to file a bankruptcy that will stop the foreclosure.
- “Do Nothing”
Your financial life may be so destitute that even if creditors got a judgment against you, it would be worthless. If you are older and receiving pension and/or social security and don’t own many assets, you may be “judgment proof”. You’ll probably still have to deal with creditor calls for awhile.
When bankruptcy is appropriate, it is usually not a question of maintaining good credit – your credit standing is probably already damaged. Judgments, delinquent payments, and credit counseling services are reported to the credit agencies for long periods of time like bankruptcy. Few lenders give credit under those circumstances anyway, and even if you satisfy a judgment it still is a part of your credit history.
The credit reporting bureaus report a Chapter 7 filing for a period of almost ten years. The credit bureaus report a Chapter 13 filing for almost seven years as long as you successfully complete the plan. If the plan is dismissed, then the Chapter 13 will be reported for ten years as well.
A fresh start allows you to re-establish your damaged credit. Aside from being reflected on your credit report, the bankruptcy laws do not restrict you form obtaining credit after the case is completed. Keep in mind that whether you have good or bad credit is always a subjective decision in the eyes of a prospective creditor. Of course, you must be prepared to explain why it is necessary to file if a prospective creditor should inquire. Maintaining a good “track record” after filing will minimize the adverse impact of the financial troubles leading to the bankruptcy. With the right strategy, you can build good credit once again. Our office provides a booklet free of charge to each client explaining how to re-establish credit after bankruptcy.
There may be some “pre-filing” strategies to re-establish credit. A non-filing spouse’s credit report is not affected by the bankruptcy unless the spouse is a co-signer on any of the debts. If only one spouse files then the other may be able to maintain a good credit standing. Also, if there is a bank card or line of credit with a zero balance before filing, you may be able to use the card after filing, provided it is not revoked by the creditor.
What’s The First Step I Should Take To See If Bankruptcy Is Right for Me?
The first thing to do is schedule an appointment with the experienced bankruptcy attorneys at CTZ Law by calling (586) 285-1700 for a free consultation. Unlike other bankruptcy law firms, at CTZ Law the lawyer you meet with is the same person who will prepare your Bankruptcy Petition, Schedules and related documents. At CTZ Law our attorneys do not delegate the job of preparing and filing your case to some secretary, law clerk, or even an associate attorney. Your bankruptcy case will be prepared by a partner at CTZ Law, and that same attorney will be the person who represents you in the Federal Bankruptcy Court. Because of our attention to detail and personal legal service on each and every case, our clients are always afforded thorough and efficient legal representation from the initial consultation until the Bankruptcy Discharge is received.
CANU, TORRICE & ZALEWSKI, PLLC / CTZ LAW
www.AllLegalMatters.com
(586) 285-1700
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