Category Archives: Bankruptcy Myths

10 Michigan bankruptcy myths.

1. You Cannot File Bankruptcy Under The New Law

Many people believe that the new bankruptcy law passed in 2005 essentially made bankruptcy unavailable to most people. While eligibility for a Chapter 7 bankruptcy may depend on your income, bankruptcy is still available. In many cases, all of the benefits under the old Michigan law remain under the new law.

2. You Will Lose Your House

While you cannot wipe out a mortgage in bankruptcy, if you are able to maintain your payments on your house you can keep it. If you file a Chapter 13 monthly payment bankruptcy, you can use your bankruptcy plan to catch up past due payments over a much longer period than the bank is like.

3. You Will Lose All Your Possessions

People are often afraid that if they file bankruptcy they will lose everything they have. The new Michigan bankruptcy laws generally allow you to keep personal items such as the equity in your home, appliances, furniture, vehicles and similar household property. In most cases, you can also keep your retirement accounts.

4. Your Bankruptcy Will Be Public Knowledge

While anyone in theory can go to the Bankruptcy Court and review case files, this is very uncommon. Most people that file bankruptcy do so without their friends or family knowing anything about it.

5. You Will Never Be Able To Get Credit Again

While bankruptcy has a negative effect on your credit rating, it also reduces your overall debt. Many individuals are able to rebuild their credit over a matter of a few years after filing bankruptcy, and find that bankruptcy itself does not prevent them from obtaining loans for a vehicle or a home.

6. Bankruptcy Cannot Wipe Out Court Judgments

Many people believe that once a there is a court judgment there is nothing they can do. In fact, bankruptcy prevents a court judgment from being collected. However, certain judgments, such as divorce judgments, generally are still collectible.

7. Creditors Will Continue To Call You

Once you file bankruptcy, the law prevents a creditor from contacting you directly or by phone or mail in an attempt to collect a debt.

8. You Can Pick Or Choose Which Debts To Include In A Bankruptcy

When you file Bankruptcy, you need to notify all of your creditors. Some people prefer to leave certain debts off their bankruptcy and “not include” them in the bankruptcy. While on some cases you can agree to pay a debt despite the bankruptcy, you must list all of your debts and creditors in the bankruptcy papers.

9. You Still Owe All The Unpaid Back Taxes

While taxes are sometimes non-dischargeable, you can often discharge personal income taxes as long as they are at least 3 years old and you have filed returns.

10. Filing Bankruptcy Is Difficult

While it is important to carefully review all of the information included in a bankruptcy filing, we strive to make the process very smooth and relatively painless.

Have more questions about Michigan bankruptcy laws? Call us for a free consultation 734-722-2999

Can you file a second bankruptcy in the State Of Michigan?

Many people are surprised to learn that you can file for bankruptcy more than once. You will need to follow certain guidelines in order to qualify for bankruptcy a second time, most having to do with the waiting periods between filings. For example, if you filed for bankruptcy Chapter 7 the first time, you will need to wait 8 years before you can file for Chapter 7 again.

You will only have to wait 4 years if your previous bankruptcy was a Chapter 13, and you plan to file for Chapter 13 a second time. If you initially filed for a Chapter 13 and are now seeking bankruptcy protection under Chapter 7, the waiting period is six years. A Chapter 13 can be filed after two years if your first bankruptcy was a Chapter 7. The same first time procedures for filing apply to your second time as well, including:

Credit counseling class before your petition is filed
A bankruptcy hearing
Completing a financial management class after your hearing and before your case is officially
If you are experiencing financial problems and were previously granted a bankruptcy, a Michigan bankruptcy lawyer can make sure that you are fully informed of the laws pertaining to a second filing and how they apply to your particular situation.

The Bankruptcy Process in Michigan
The bankruptcy process can be complex, especially if you are filing for a second time. Not only will you need to meet the requirements for a second filing, your creditors may be more difficult to work with. You should also expect the court to conduct a thorough review of your finances before a second bankruptcy is approved.

Attentive Service As You File the Second Time Around
We wll work with you one-on-one, and make sure you are in full compliance with filing statutes before your petition is submitted. we provide our clients a very high level of service and can discuss how to proceed with a seond filing during a free initial consultation.

Call us for a free consultation 734-722-2999

5 Bankruptcy Myths Debunked

Nadya Suleman (known to gossip magazines as “Octomom”) recently filed for Chapter 7 bankruptcy after accumulating roughly $1 million in debt. Tabloids and gossip blogs have criticized Suleman’s spending and lifestyle, but she’s far from alone in her financial woes. Legal technology provider Epiq Systems estimates that 1.21 to 1.25 million Americans will file for bankruptcy this year, down from 1.38 million last year.

While some assume that a bankruptcy filing means the person can’t resist the temptation of credit cards (and in some cases, it may), most people who will file for bankruptcy do so for other reasons. Here’s a look at some of the myths surrounding consumer bankruptcy.

1. People who file for bankruptcy are financially irresponsible. “There’s always going to be some kind of abuse, but it’s far more likely that people run into very serious personal problems in one of three areas: losing their job, going through a divorce, or suffering a serious illness,” says Walter W. Miller Jr., who teaches bankruptcy law at Boston University School of Law.

Long-term unemployment, the legal fees associated with divorce, the cost of running two households following a divorce, or the high cost of medical care have all driven well-intentioned Americans into bankruptcy. As of April 2012, more than 5.2 million Americans had been unemployed for six months or longer, according to the Bureau of Labor Statistics. Meanwhile, a 2011 survey by the Centers for Disease Control and Prevention found that 20 percent of American families had problems paying medical bills in the past year.

2. Bankruptcy discharges all past debts. Many people file bankruptcy hoping they’ll be able to start fresh afterwards, but several types of debt are not discharged by bankruptcy. “If you have domestic support obligations [such as alimony or child support], those can’t be removed under any circumstances,” says Lita Epstein, author of The Complete Idiot’s Guide to Personal Bankruptcy. “If you have to pay restitution because of a crime, that’s another debt that can’t be removed.”

As a result of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, student loan debts also fall in that category, although a Congressional bill called the Fairness for Struggling Students Act would allow private student loans to be discharged in bankruptcy court. According to Epstein, student loans can be forgiven if you’re able to prove a hardship such as permanent disability, but that process is separate from bankruptcy.

Tax debts are sometimes reduced or discharged depending on the circumstances, but as Epstein says, “if you didn’t file tax returns, there’s no way you’re going to get those tax debts removed.”

3. If you spend with abandon right before bankruptcy, you won’t have to pay that money back. Michael Greiner, a Warren, Mich.-based bankruptcy lawyer and author of Bankruptcy 101: An Insider’s Guide to Filing Bankruptcy by Yourself, Without an Attorney, says some people assume they can charge up their credit cards before filing bankruptcy and then have those debts discharged. “Courts have ruled that that’s considered fraud, and debt that’s incurred as a result of fraud is not discharged,” he explains. “If you charged a bunch of stuff before you filed bankruptcy, you usually can’t get away with it. That’s a misconception.”

4. Bankruptcy permanently ruins your credit. People who file bankruptcy are often surprised by how quickly they’ll start getting credit card offers in the mail again. Epstein says offers for secured credit cards (which require a deposit to the bank) with a low limit can arrive within a month of the debt discharge. She recommends that those coming out of bankruptcy get a secured credit card and start making regular, on-time payments to rebuild their credit. “Usually about six to 12 months into it you can get a regular credit card and drop the secured credit card, since the secured card can be expensive,” she says. “But if you take on a credit card and start making late payments, your credit score will not improve.”

After the debts are discharged, it’s also smart to check their credit report and “make sure that everything that was discharged in the bankruptcy is marked on their credit as discharged,” Epstein adds. She’s seen people qualify for a mortgage within two or three years of a bankruptcy, depending on the circumstances.

5. Bankruptcy is a cure-all. Chapter 7 bankruptcy discharges certain debts, while Chapter 13 may reduce or reorganize debts. However, neither one offers an easy solution. “People sometimes think it’s going to solve all their problems, and it doesn’t,” says Miller. “In Chapter 7, you could lose property. If you go into Chapter 13, you could keep your house but also have to keep making payments and have a very modest lifestyle for at least three to five years.”

Filing for bankruptcy isn’t cheap, either. According to a study released this month by the National Bureau of Economic Research, the average bankruptcy fees increased from $921 to $1,477 after 2005’s BAPCPA was enacted. Before filing, applicants are required to go to credit counseling, during which the counselor may explain other options like negotiating a payment plan with creditors. “Bankruptcy is a major disruption in your life,” he says. “If you can work it out with creditors, go that route.”

The Myths of Bankruptcy in Michigan

Like most formidable situations, bankruptcy has earned its reputation based on a few truthful facts and too many embellishments. Much of this misinformation was disseminated to the public after the new bankruptcy laws went into effect in 2005. Once you know the facts, filing for bankruptcy is not nearly as frightening as it first appears. Here are some of the most common myths about bankruptcy that you need to know before you begin your fresh start.Myth #1: It is very difficult to file for bankruptcy.

Not true. The new bankruptcy laws have drastically decreased the amount of time it takes to be discharged from bankruptcy down to nine months. In today’s economic climate, it is understandable that individuals need to file for bankruptcy for a new beginning. A qualified, experienced bankruptcy lawyer can make the process as simple and painless as possible.

Myth #2: You will lose everything.

This one of the biggest misconceptions that deter people who should from filing. Bankruptcy laws do vary from state to state, but every state has exemptions that can protect certain assets, such as your house, car (of reasonable value), qualified retirement plans, household goods and necessary clothing.

Myth #3: You will never get credit again.

Quite the opposite. Before you know it, your mailbox will be blossoming with credit cards offers again. The catch is that they will be from subprime lenders charging very high interest rates. In fact, you have a credit card with no balance at the time you file, you don’t have to include it in your list of creditors, since you don’t owe them money. There is also a good chance you may be able to keep the card after the bankruptcy.

Myth #4: If you are married, both spouses have to file.

This is not entirely true. It is uncommon for one spouse to have a significant amount of debt in their name only. If there are debts that a married couple wants to get discharged that they are both liable for, they should file together. If only one spouse files for bankruptcy, the creditors usually demand the entire payment from the spouse who didn’t file.

Myth #5: You can only file for bankruptcy once.

You can actually file for bankruptcy more than once, but the new bankruptcy laws extended the amount of time in between filings. Chapter 7 bankruptcy can be filed for once every eight years and a Chapter 13 filing every two years. If you want to file for both on separate occasions, there is a four year wait in between the two.

Myth #6: Everyone will know you filed for bankruptcy.

Unless you are a very prominent person or a major corporation and the media catches wind, the only people that will know about your filing is your creditors. The amount of people filing is so immense that very few publications have the time, space or inclination to run them.

If you are seriously considering bankruptcy and you live in Michigan call Firebaugh and Andrews today at 734-722-2999