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10 Things You Should Know About Bankruptcy Court

1. Deadlines are critical in bankruptcy court. The regulations for this process are very complex, can be technical, and all case deadlines must be met. Failing to file the appropriate forms or documentation on time could result in your case being dismissed or delayed. If your case is dismissed you could lose your filing fees and have to start over again from the beginning.

2. New federal regulations passed in 2005 make it harder to qualify for complete debt elimination. The Bankruptcy Code was changed in 2005 to make it more difficult for consumers to wipe out debt completely if there are resources available to pay these obligations. Many consumers who would have qualified for a Chapter 7 discharge before these changes must now use Chapter 13 instead, which involves repayment of some of your debts. This is determined using the Means Test.

3. A Chapter 13 bankruptcy includes a repayment plan that must be filed with the bankruptcy court. The court will determine exactly what income and expenses you have, and then calculate the reasonable expenses and monthly repayment amount for your case. This plan must be submitted to the court and confirmed.

4. Representing yourself in bankruptcy court can be a big mistake. The laws regarding bankruptcy can be very confusing, and many common errors could cost you a chance at a new financial start. An experienced attorney can help you determine the right exemptions, represent you at hearings and meetings with creditors, and get the best results possible for you.

5. Bankruptcy court is a court which exclusively deals with bankruptcy cases. These courts are located around the United States, and they only handle bankruptcy cases and matters related to this legal area.

6. The bankruptcy court will appoint a trustee in your case. This trustee will be responsible for overseeing your specific case and ensuring that all of the documentation is filed. The trustee is not in favor of either the consumer or creditors, but is an officer of the court instead.

7. Choosing the right attorney to represent you in bankruptcy court is important and can affect the outcome of your case. You want a lawyer who will aggressively defend you and work hard to overcome any objections that may be presented by your creditors or the trustee. Experience is also important, so you want an attorney who is very knowledgeable in bankruptcy law.

8. The penalties for lying or hiding assets in a case can be severe. The bankruptcy court judge has the authority to dismiss your case, order fines and penalties deemed appropriate, or even have perjury or other criminal charges filed against you. It is essential that you are completely honest in all your dealings with the court to avoid any sanctions or penalties.

9. The exemptions you claim in bankruptcy court will affect whether or not your property can be seized and sold to pay creditors. The laws of each state are different. An experienced attorney can help you determine whether to use the federal or state exemptions, or whether a combination of these two are better in your specific case.

10. A discharge is the order issued by the bankruptcy court when your case is completely finished and closed out. Usually any debts that have not been repaid are eliminated in the process unless you have reaffirmed your obligation.

Call Firebaugh & Andrews for your free evaluation, with over 50 years combined experience they can make sure you make the right decision.

Are you Afraid of Filing for Bankruptcy in Michigan?

For most people the decision to file bankruptcy in Michigan is extremely difficult. First, there is the fear of the unknown. Some people fear that their credit will be destroyed forever. Others fear that they will lose their property. Yet others fear the humiliation that their friends or neighbors will find out. Some fear that they will be harassed by their creditors at court.

Although filing for bankruptcy is a very difficult and important decision, most of people’s fears are unfounded. Ironically, most people’s credit improves after they file for bankruptcy. The majority of people filing for bankruptcy in Michigan already have fairly low credit scores. This occurs because their creditors keep reporting delinquent balances or obtaining judgments. Once a person files bankruptcy, all of their debts are generally discharged. As a consequence, there are no longer delinquent payments being reported dragging down their credit score. It’s not unusual to see a person’s credit score rise a 100 points approximately a year after filing for bankruptcy.

Most People Keep Their Property

Another fear people have is that they will lose their property. This fear too is unfounded for most people. The Bankruptcy Code allows people to retain most if not all of their assets. For example, a person could have $10,000.00 in the bank and file for bankruptcy or even up to a $1,000,000.00 in a retirement plan. The code provides for protection for a substantial portion of a person’s property in order to help them obtain a fresh start. In addition, a person can keep their car or their house as long as they agree to continue to make payments on that property.

It’s Okay!

Filing for bankruptcy is difficult for most people because of the fear of humiliation or because they believe they have failed in some way. Nobody generally makes it a strategy to file for bankruptcy. First, if your neighbors and friends will not find out that you filed for bankruptcy unless they make it a habit of checking the court files. Filing for bankruptcy should be approached more from a financial point of view and less as a moral problem. Problems happen to people that often have a negative impact on their financial situation such as a divorce, illness, job termination, or substantial depreciation in the value of their house. These problems may wreak havoc on a person’s finances if not addressed.

Bankruptcy Stops The Harassment

Some people worry about being harassed at court by their creditors. What many of these people don’t realize is that bankruptcy stops creditors from harassing them.

If a person is unable to pay their bills, a creditor can obtain a garnishment of their wages or seize their property such as a car or household items. Bankruptcy stops creditors from collecting. Although creditors may appear at court to question a Debtor, it is rare that they do.

burst_free_consultationWe understand that filing for Bankruptcy is an important and difficult decision. It is a decision that a person should make only after consulting a professional with expertise in the field. My Firebaugh & Andrews specializes in helping people file for bankruptcy. We have helped thousands of people discharge their debts under Chapter 7 or reorganize their finances under Chapter 13.Firebaugh & Andrews has been practicing bankruptcy law for over 50 years combined.

We offer free consultations to help people understand how bankruptcy would affect them and to take the unknown and fear out of filing for bankruptcy.

Married couples can file for bankruptcy jointly or individually. Learn which option is best for you.

If you are a married couple, you can choose to file for bankruptcy jointly or individually. Whether it is in your best interest to file a joint or individual bankruptcy depends on:

  • the amount of property you own
  • whether you have joint debts, and
  • the exemption laws of your state.

Individual Bankruptcy Filing

Just because you are married doesn’t mean that you must file for bankruptcy together. Below, we discuss the benefits and drawbacks of one spouse filing an individual bankruptcy.

Benefits

If only one spouse has debt, that spouse can file for bankruptcy individually to discharge his or her own obligations. An individual bankruptcy allows one spouse to wipe out his or her debts without negatively affecting the other spouse’s credit. Also, if your state doesn’t allow you to double your exemptions in a joint petition, you may be able to protect more of your property by filing two individual bankruptcies.

However, keep in mind that if you live in a community property state, all community (marital) assets are considered property of the bankruptcy estate regardless of who is on title even if only one spouse files.

Drawbacks

If both spouses need to file for bankruptcy relief, filing two individual cases will result in higher court costs and attorney fees. Further, in most cases, a bankruptcy filing by one spouse doesn’t offer any protection to the non filing spouse from his or her creditors. But there are exceptions.

If you have joint debts, the non filing spouse will be protected by the co-debtor stay in Chapter 13 bankruptcy. Also, in community property states, if a joint debt is discharged by one spouse, that creditor can’t go after any community property to satisfy the non filing spouse’s obligation.

Joint Bankruptcy Filing

Bankruptcy law allows married couples to file a single joint bankruptcy petition together. There are both benefits and drawbacks to a joint filing.

Benefits

Court filing fees for individual and joint bankruptcies are the same. In addition, if you wish to hire a bankruptcy lawyer, attorney fees will typically be much lower for a joint filing than two individual bankruptcies. This means that filing a joint petition can save you a lot of money over filing two individual cases.

Further, a joint bankruptcy is more convenient and efficient because it allows married couples to complete only one petition, attend mandatory hearings together, and discharge all of their debts through a single bankruptcy.

Drawbacks

Some states don’t allow married couples to double their exemptions in a joint bankruptcy. This means that depending on where you live, you may not be able to protect as much property if you file a joint bankruptcy. In addition, if one spouse owns a lot of nonexempt separate

The Difference Between Secured Debt and Unsecured Debt

There are two different types of consumer debt. There is secured debt which is a loan that is guaranteed by specific collateral and there is unsecured debt which is not secured by specific collateral. It is important that consumers understand the differences between the two types of debt, especially if they are having trouble making their loan payments, because the different types of creditors have different rights when it comes to collecting money from you and they have different priority when it comes to bankruptcy proceedings.
What is a Secured Debt?
As mentioned above, secured debt is a loan that is attached to a specific piece of property. The most common example is a mortgage which is, most often, secured with the property or home that the loan is used to purchase. So, if a borrower is having trouble making his mortgage payments and defaults on the loan, the lender can take back the property or the home in order to satisfy the debt. If the loan was not secured by the collateral (in this case the home or property) then the lender would have the same rights as other unsecured lenders and need to try to recover the money from the borrower’s total assets. It would not have any specific right, or priority in, the property or the home.
Typically, secured loans are offered at a better interest rate and better terms than unsecured loans because of the added protection that the collateral provides the lender.
What is Unsecured Debt?
In contrast to secured debt, unsecured debt is provided to a borrower without any specific collateral. For example, credit cards are unsecured debts. If a borrower stops making payments on his or her credit card, the credit card lender is able to sue the borrower for repayment but does not have a right to any specific piece of property. So, while a judge could order that property be sold to satisfy debts, the unsecured lender has no ability to require the sale absent a judicial ruling.
Bankruptcy Rights of Different Kinds of Creditors
While this might sound like an academic discussion since the borrower retains the obligation to repay all of his or her lenders, whether they be secured lender or unsecured lenders, the discussion is far from merely academic. While in theory the borrower has the responsibility to repay all of his or her debts, that is not always possible. If the borrower is defaulting on loan payments then the borrower may lack the funds to repay all of his or her obligations. Often, the borrower is left with no choice but to file for bankruptcy.
In a bankruptcy proceeding, secured creditors are entitled to the collateral which guarantees their loans in the order that the loans were made. For example, if a homeowner has an original mortgage that was properly executed and filed and then a second mortgage that was taken out at a later time and properly executed and filed and both loans were secured by the same property, then the original mortgage loan takes precedence over the second mortgage. It is only after both loans have been fully satisfied that unsecured lenders are entitled to any proceeds from the sale of the property or home.
Loan obligations, including student loans, car loans, mortgages and credit cards, can quickly become overwhelming. Therefore, it is important to understand your creditors’ right to recover payment from you and the priority in which they are entitled to do that.

Being Sued by a debtor? Three things to be aware of

1) Never give creditors access to your bank account.

Now here is one we get calls all the time from a potential client to say well they said they would only take X amount out, then you check your bank account and instead of $200 gone they took $1200, now its your word versus their word, good luck ever getting that money back.

2) What can creditors take and not take?

Here is a law that you must be aware of and why its SO important to hire a professional like Firebaugh & Andrews to make sure you are not taken advantage of. This law is to protect those that are either on disability or SSI. Your benefits are EXEMPT from from seizure protected by federal laws. Now this is not automatic you MUST make the creditors your bank aware that your deposits in your account (the income) is from your disability or SSI payment. We have seen cases of unscrupulous debt collectors grabbing your cash, if they do take it again good luck getting your money back.

3) Never ignore lawsuits.

The majority of lawsuits that are filed end up in default judgment because the consumer never shows up. The biggest thing we hear from consumers is, ‘I can’t afford a lawyer and, gosh, I did have a Visa or a MasterCard at some point, so I don’t have any defense.’ Yes, you do. You have a defense based on who’s suing you. If it’s the original creditor, like a Citibank, it’s one story; but, if it’s a junk debt buyer, a bottom feeder, it’s a different story altogether.

You can see how important it is to hire a professional to make sure your protected, Call Firebaugh & Andrews for your free consultation 734-722-2999

What Bankruptcy Records And Documents Are Needed?

The documents listed on this page provides an overview of the type of information we will need to get the bankruptcy completed.  Each case is different variations are common.

There are some differences between the documents required for a Chapter 7 bankruptcy petition and those required for a Chapter 13 bankruptcy petition.

Typical documents and information taken into account during a Chapter 7 bankruptcy case include:

  • A list of your current personal property and its value. This includes assets such as:
    • Cash
    • Checking or savings accounts, certificates of deposit or annuities
    • Qualified educational or tuition accounts
    • Pension or profit sharing accounts
    • Household goods, furniture, electronics and computer equipment
    • Deposits with utility companies, landlords, phone companies, etc.
    • Collectibles such as books, art, antiques, etc.
    • Automobiles, trucks, trailers and other vehicles
    • Boats, motors and accessories
    • Aircraft and accessories
    • Clothing
    • Furs and jewelry
    • Firearms, sporting equipment, photographic or other hobby equipment
    • Interest in insurance policies
    • Stocks and business interests
    • Government or corporate bonds
    • Moneys due you by others, including tax refunds
    • Alimony, maintenance, support, or property settlements to which you are entitled
    • Interests in the estate of a decedent, life insurance or trust
    • Patents, trademarks and copyrights
    • Licenses and franchises
    • Office equipment, furniture and supplies
    • Machinery, fixtures and equipment used in business

A bankruptcy lawyer can help you determine which of this property can be included on the schedule of claimed exemptions and protected from liquidation.

  • A list of real property (real estate), including your interest in the property, the current value and the amount of any secured claim.
  • A list of your creditors, the amount that you owe them and any security on those accounts

A bankruptcy attorney can help you determine which debts belong on the secured schedule and which of your unsecured debts belong on the priority schedule and which on the non-priority schedule.

  • A list of any current contracts or unexpired leases, whether the debtor is the lessor or the lessee of the property
  • A list of the names and addresses of any co-debtors on any accounts, along with the names and addresses of the creditors on those accounts

Co-debtors can be affected by your filing. The impact on a co-debtor is different depending upon whether you file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. A bankruptcy lawyer can explain how each one affects any joint account holders or co-signers on your accounts.

  • The name and address of your employer, along with your occupation and the length of your employment
  • Documentation of your income from employment, including payroll deductions
  • Income from other sources, including alimony or maintenance
  • In some cases, a list of current monthly expenses
  • A list of any payments made to creditors during the past 90 days
  • A list of all payments made during the past year to creditors who are ‘insiders’. (Creditors with whom the debtor has another relationship, like family members)

A bankruptcy lawyer can provide you with the exact legal definition of ‘insider’ and help you determine whether or not you have made any payments that fall within this classification.

  • A list of any lawsuits or administrative proceedings the debtor was a party to within the year preceding filing
  • A description of any and all property that has been seized, garnished, attached, repossessed, foreclosed or returned during the preceding year
  • A list of any property that has been assigned for the benefit of creditors within the 120 days preceding
  • Any property that has been in the hands of a receiver, custodian or court-appointed official during the preceding year
  • Any gifts or charitable contributions you made within the preceding year
  • Losses from fire, theft, casualty or gambling during the preceding year
  • Payments related to debt counseling or bankruptcy within the preceding year
  • Any property transferred during the two years immediately proceeding filing
  • A list of any financial accounts closed, sold, or transferred within the preceding year
  • A list of safe deposit boxes (along with locations and contents) held presently or within the past year
  • A list of any set-offs by any creditor in the past 90 days
  • Any property held or controlled by the debtor for another person
  • All addresses at which the debtor has lived during the preceding three years
  • Nature, name and location of any businesses owned during the preceding six years

Having these items ready will help speed up the process.  Call us today for your free consultation 734-722-2999

How Long Does Filing Chapter 7 Take?

How Long Does Filing Chapter 7 Take?

For those who are struggling with debt and experiencing harassment from creditors, time is of the essence. This can be especially true when it comes to getting finances back on track and restoring a sense of normalcy to life. You, or someone you know, may be considering filing Chapter 7 bankruptcy but are unsure about how long the filing process takes.

Typically, a Chapter 7 bankruptcy case is relatively quick to complete. Your bankruptcy case could be completed and discharged within 3-6 months of filing bankruptcy.

However, there are some important dates that can affect your right to file a case and obtain relief. The following filing timeline illustrates the relevant dates in a typical Chapter 7 bankruptcy case.

6-8 Years Before Your Bankruptcy
If you received a Chapter 13 or Chapter 12 discharge in a case filed within the previous six years, you will be eligible for a Chapter 7 discharge generally if, in the prior case, you paid at least 70 percent of your allowed unsecured claims, and your plan was proposed in good faith and was your best effort.

You are ineligible for a Chapter 7 discharge until eight years from the date you filed a prior Chapter 7 and received a discharge.

1 Year Before Your Bankruptcy

  • If you have tried to delay or defraud your creditors by transferring, hiding, or destroying your property within the 1-year period prior to your bankruptcy, the court may deny you a Chapter 7 discharge and even allow your creditors to recover the property that you transferred.
  • Also, if you pay back one of your creditors who is also a relative or close business associate (“insider”) at any time within the 1-year period prior to the filing of your bankruptcy case, the payment may be deemed an unlawful preference and the court may recover all such payments and distribute them to your other creditors.
  • If you had a prior bankruptcy case dismissed within one year of the time you file a Chapter 7 case, the Automatic Stay entered in the Chapter 7 case will be terminated within 30 days unless you can demonstrate that the Chapter 7 case was filed in good faith.
180 Days Before Your Bankruptcy
If within 180 days before your bankruptcy you had a prior bankruptcy case that was dismissed because you failed to obey court orders or you voluntarily requested a dismissal, then you may not file your bankruptcy case until this 180-day period expires.

Also, within the 180 days before your bankruptcy filing, you must receive an individual or group briefing from an approved nonprofit budget and credit counseling agency.

90 Days Before Your Bankruptcy

  • You must be a resident of the state in which you intend to file your bankruptcy case for at least 90 days before the filing. If you have not lived in the state in which you intend to file your case for at least 90 days, you may only file your case in the state where you have resided, or which has been the location of your principal assets, for a majority of the prior 180 days.
  • Also, if you pay back any of your creditors, even one who is not a relative or close business associate (“insider”), at any time within the 90-day period prior to the filing of your bankruptcy case, the payment may be considered an unlawful preference and the court may recover all such payments and distribute them to your other creditors.
  • If you incurred new credit of $500 or more for “luxury goods or services” within the 90-day period before your bankruptcy, or if you obtain a cash advance in the amount of $750 within 70-day period before your bankruptcy, the debt is presumed to be non-dischargeable.
Your Case is Filed!

  • Your case is formally commenced when you file your bankruptcy petition with the appropriate bankruptcy court. In most cases, as soon as you file your petition, the court will enter an Automatic Stay order prohibiting your creditors from taking or continuing any collection or legal action against you. This means no more harassing letters or phone calls for as long as the automatic stay remains in effect, generally for the duration of your bankruptcy case.
  • Next, the court will send a notice of your case to all of the creditors listed in your petition.
  • Additionally, the bankruptcy court will assign a bankruptcy trustee to oversee your case. The trustee is a federal employee appointed by the court to monitor your case and make sure you are eligible for bankruptcy. The trustee will review your petition, make sure that it is complete, and then schedule a meeting of your creditors.

15 Days After Your Case is Filed
You have a deadline of 15 days after you file your petition to file certain financial “schedules” with the court-documents declaring your assets, liabilities, expenses, income, and a statement of your affairs. In most case, however, your attorney will file these schedules with your petition.

Approximately 15 Days After Your Case is Filed
Within approximately 15 days after you file your case, the court will mail the Notice of Commencement of Case to you and to all of the creditors listed in your petition. This notice will inform you of the date set by the court for the meeting of your creditors, and the deadlines for your creditors to object to your case and file their claims against you.

Approximately 30 Days After Your Case is Filed

  • Within 30 days after you file your case, or before the meeting of your creditors if that occurs first, you are required to file a Statement of Intention. In this document, you advise the court whether you intend to keep your property that serves as collateral for your debts, or whether you intend to surrender it to your creditors.
  • If you intend to keep the property, you must indicate your intention to: (1) reaffirm your debts and continue making all of your payments on those debts; or (2) redeem the property by paying the fair market value for it, in which case you will receive a discharge of debt owed over the fair market value of the item.
  • You must serve a copy of your Statement of Intention on the bankruptcy trustee and your creditors at the time you file it with the court.

    45 days After Your Statement of Intention is Filed
    You have 45 days after your Statement of Intention is filed to surrender or keep your property as you indicated in your Statement and make all necessary payments.

Approximately 3 to 6 Weeks After Your Case is Filed

  • The court will hold the Meeting of Your Creditors about three to six weeks after your bankruptcy case is filed. At least seven days before this meeting, you are required to provide to the trustee and any creditor requesting it a copy of your most recently filed tax return.
  • The court-appointed trustee will preside over this meeting. At the meeting, which you are required to attend, you will be asked to testify under oath as to the accuracy of the statements in your petition. However, most creditors typically do not appear at the meeting, and you will not be before a judge. The meeting is very informal, and in most cases will last no more than 10 minutes. If you do not attend the meeting, your case will be dismissed.
  • Within 45 days after you file your petition, you must file a statement containing a certificate from your attorney that you received an explanation of the various chapters available to you under the bankruptcy code, evidence of any payments you’ve received from any employer within 60 days of your filing, an itemized statement of your monthly income, and an estimate of any increase income or expenditures you expect over the next 12 months.

    30 Days After The Meeting of Your Creditors
    The bankruptcy trustee and your creditors have to 30 days after the conclusion of the Meeting of Creditors in which to make objections to your exemptions.

    60 Days After The Meeting of Your Creditors

    • Your creditors have 60 days after the date first set for the Meeting of Your Creditors to object to the discharge of any of the debts listed in your petition and schedules.
    • Your creditors can object to your request to discharge a debt if the debt was obtained or incurred as a result of any of the following types of misconduct: fraud; embezzlement or larceny; and any willful or malicious injuries you have caused others; or a divorce or separation (this does not include debts for child support and spousal maintenance, which are non-dischargeable by law).
    • Additionally, your creditors can object to the discharge of all your debts if you have engaged in any of the following conduct: concealment or destruction of property or financial records; false statements; withholding information; failing to explain losses; failure to respond to material questions; or a discharge in a prior Chapter 12 or 13 case filed within the previous 6 years or a Chapter 7 case filed within the previous 8 years.
    • The trustee must move to dismiss your case within this time period if he finds that the granting of relief would be an abuse of the provisions of Chapter 7. You will receive your Chapter 7 discharge 60 days after the meeting of your creditors You will receive your discharge as soon as the 60-day time period for objecting to discharge or moving to dismiss your case expires. Even if you receive your discharge, the trustee may, however, move to set it aside if you do not turn over nonexempt property or if you commit other bankruptcy violations.

    The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 imposes one last hurdle before you’re eligible for your discharge–the financial education requirement. This requires you to complete an instructional course concerning personal financial management. Your attorney can refer you to an approved financial management class.

    90 Days After The Meeting of Your Creditors
    All of your creditors (except for government entities) must file their proofs of claim (these are documents your creditors submit to the court specifying how much you owe them) within 90 days after the first date set for your creditor meeting if they wish to share in the payments from your case if any assets are available for liquidation.

Government entities that have claims against you (such as the IRS) have 180 days after the filing of your case to submit their proofs of claim.

 

Chapter 13 Bankruptcy is it Better for My Credit Than Chapter 7?

Chapter 7 and Chapter 13 bankruptcy will stay on your credit report for the same amount of time; about ten years. Although they both have the same effect on your credit score, a particular creditor reviewing your report to decide whether to lend you money might view one chapter more favorably than the other. In particular, a creditor might be more willing to lend to you if you filed for Chapter 13 rather than Chapter 7.

Bankruptcy &Your Credit Report and Score

Your credit report is important if you want to borrow money – the potential lender will review the report to determine if lending to you would be risky. Those with good credit are a low risk and are more likely to get loans with good terms; those with poor credit are high risk and may have more difficulty.

These lenders will look at your credit score and your overall credit history when deciding whether to lend to you. Your credit score is based on a multitude of factors, including the amount of available credit you have, the ratio of your balances due to your credit limits, your total amount of debt and any judgments or bankruptcies you have on record.

Chapter 7 and Chapter 13 bankruptcy both affect your credit score the same – having a Chapter 13 bankruptcy on your credit report will not be any better for your score than a Chapter 7. However, the individual reviewing your report will look at more than your score.

Some Lenders Take Into Account the Difference Between Chapter 13 and Chapter 7

A Chapter 13 bankruptcy involves repaying some or all of your debt over a three- to- five-year period, while a Chapter 7 bankruptcy involves wiping out most of your debts without paying them back.

Both Chapter 7 and Chapter 13 theoretically leave you in a good position to take on new debt, as they both free you from the burden of old debts and give you a fresh start. Beyond that, if you have a Chapter 13 on your credit report, a lender looking at your report may see it as a responsible way to handle your debt, because you made a good faith effort to repay your debts despite your financial hardship. In that way, a Chapter 13 may be better for your credit than a Chapter 7.

Call Firebaugh & Andrews for your free evaluation today 734-722-2999

Keeping your auto: car loans in bankruptcy

If you’re considering bankruptcy, it can be hard to decide what to do with your car loan. You may have difficulty paying all your debts, but at the same time, you want to keep your vehicle.

In fact, it could be nearly impossible to get back on your feet financially without the use of a car, which is often needed to travel to a job and earn money, says Roberta Andrews, a bankruptcy attorney with Firebaugh & Andrews Westland Michigan 48185

Fortunately, it is possible to keep a car in bankruptcy. “For people who have a vehicle, are financing it and want to keep it, there’s a method that can be used for them to continue to make payments and maintain the car they own,” says Andrews

The exact method to use depends on the type of bankruptcy that’s filed, Chapter 7 or Chapter 13. Here’s a look at the options for car loans under each type of bankruptcy.

Auto loans in Chapter 13 bankruptcy

Under Chapter 13, the borrower would continue to pay off some of his or her debts in a reorganization, or restructuring, of what he or she owes, says Andrews. The borrower would repay the car loan debt as part of the repayment plan, but the total amount repaid would depend on how old the car loan is, Andrews says.

Newer car loans. If the vehicle loan is less than 910 days old, the borrower must pay the full value of the car loan, says Andrews. However, there is a chance under the bankruptcy guidelines that the interest rate could be reduced, she says, which might lower the monthly payment.

Older car loans. If the car loan is older than 910 days, the courts would give the borrower a prorated payment amount based on how much the car is worth, says Andrews. “They’ll take a look at the car’s current fair market value, and they’ll create a payment plan from that,” he says.

Borrowers who are already behind on their auto loan payments may be able to work out an additional financial arrangement with the lender, says Andrews. “You would not only make the regular payments, but whatever the arrears are, you could also make up those payments in a Chapter 13 framework,” she says.

Should I go to a credit counselor, or to a debt consolidation service?

It all depends on your exact circumstances. Many people can be helped by credit counseling, but be careful who you go to.. Your church or neighborhood group may also have a good credit counseling program.

In my opinion, most people will not be helped by a debt consolidation service. In fact, there are many people who have paid for debt consolidation services, only to end up owing a lot more money than they did when they started. You have probably seen a lot of commercials advertising “nonprofit” services, promising to negotiate your debts with all of your creditors and to solve all of your problems. Many of those “nonprofit” services were created by credit card companies and finance companies, and most of their counselors are not properly trained. None of them can offer the absolute results that federal bankruptcy law does. On top of that, there are certain creditors who absolutely refuse to work with consolidation services. They don’t have that option in bankruptcy, where creditors have to follow the same rules as everyone else.

Firebaugh & Andrews can help you figure out what is the best course of action to take, Call us for your free consultation. 734-722-2999