Category Archives: Bankruptcy Protection Laws

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What is Michigan chapter 11, and who may qualify?

Chapter 11 is frequently known as the reorganization chapter of the bankruptcy code because it allows a debtor to reorganize financial obligations while retaining assets, generally through the sale of certain assets to pay down debt and refinance existing debts. Chapter 11 is available to both individuals and businesses.

The following is a brief description of the relief afforded to individuals and businesses through Chapter 11, for more information please call Firebaugh & Andrews for a few evaluation at 734-722-2999

Chapter 11 Overview

Filing a Chapter 11 petition grants a debtor what is known as an automatic stay from the enforcement actions of creditors. This precludes creditors from continuing collection efforts, from bringing a lawsuit, or from filing liens against property or foreclosing on property.

In Chapter 11, a debtor generally remains in control of their estate. A trustee may be appointed for cause (i.e., fraud, dishonesty, incompetence or gross mismanagement) or if such appointment is in the best interest of creditors; however, this relief is relatively rare. A Chapter 11 debtor-in-possession generally has the same rights as a trustee would have if appointed, thus any reference to rights or authority of a debtor would apply to a trustee, if appointed, as well.

Exclusive Time Periods

A Chapter 11 debtor is granted the exclusive right to file a plan of reorganization for a period of 120 days and to solicit a plan of reorganization for a period of 180 days. A debtor can seek an extension of these “exclusive periods” for cause. Otherwise, once an exclusive period lapses, any creditor or party in interest can file a plan of reorganization for the debtor.

Similarly, if a creditor or party in interest can show that a debtor is mismanaging the estate, not negotiating in good faith with creditors or using the exclusive period as leverage in negotiation with creditors, they can seek to terminate exclusivity to allow non-debtors to file a competing plan. Competing plans are rare; however, the threat of a competing plan is often sufficient to keep negotiations between a debtor and its creditors active.

Committee of Unsecured Creditors

Another tool available to balance creditors’ powers of negotiation is an official committee of unsecured creditors. The purpose is similar to that of a class action lawsuit – while each individual creditor may not have a large enough claim to justify retaining counsel, aggregate creditors’ claims can be quite large and their collective voice could benefit from legal representation. The creditors’ committee is made up of three or more volunteering unsecured creditors selected by the United States Trustee. The creditors’ committee can retain legal counsel and financial advisors to assist in the case, with the cost of such professionals carried by the debtor.

A creditors’ committee is not formed in every case and is usually limited to large, complex or highly contested Chapter 11 cases.

The Reorganization Plan

A Chapter 11 plan of reorganization provides debtors with important tools for rearranging financial affairs. For example, a plan may allow a debtor to reject certain contracts or leases with a cap on damages. This is helpful where a debtor has signed an expensive, long-term contract that is no longer beneficial.

A debtor may also refinance existing loans including increasing the time in which it must be repaid (i.e., stretching a two-year loan to five years), decreasing the interest rate if interest rates have declined since the loan was entered into, or changing/removing other arduous terms. Through Chapter 11, as with other bankruptcy chapters, a debtor can also sell an asset free and clear of all liens either through a plan or through what is a called a 363 sale. The ability to sell an asset free and clear of liens can garner a greater sale price as purchasers are assured that the property is unencumbered and the purchaser is subject to less liability.

Regardless of who files a plan of reorganization, certain creditors are entitled to vote to approve or disapprove a plan. Only those creditors that are determined to be partially impaired (e.g., reduced payments or payments over time) are entitled to vote on a plan. Creditors that are unimpaired are deemed to accept the plan and creditors that are fully impaired (i.e., will not recover) are deemed to reject the plan. However, even if they are not allowed to vote on a plan, a creditor still has the right to object to its treatment under the plan. In order for a plan to be accepted, two-thirds of creditors in number and fifty percent of creditors in dollars must vote in favor of the plan.

A Chapter 11 debtor can cramdown a plan over the negative vote of creditors in certain circumstances. Even if creditors vote to accept a plan, the bankruptcy court will review the plan and ensure that it meets statutory requirements before the plan can be confirmed. If a debtor is unable to get a plan of reorganization confirmed, the case may be converted to a Chapter 7 filing or dismissed. After a plan is confirmed, the debtor’s bankruptcy is essentially over. However, the bankruptcy court generally retains jurisdiction over the case at least until the last plan payment is made.

Chapter 11 for Individuals

Given the complexity and cost of Chapter 11, it is most often used by businesses. On the other hand, Chapter 11 may be the only option available to an individual debtor with income greater than that allowed by the Chapter 7 means test, and secured debt in excess of that allowed by Chapter 13. This is often the case where an individual owns large amounts of real property, but does not have sufficient liquidity to pay his or her debts as they come due.

The major benefit of Chapter 11 for individuals is the ability to keep assets beyond just the statutory exemptions available under Chapter 7 and Chapter 13. Given that Chapter 11 individual cases are relatively infrequent and the language of the chapter is better applied to corporations, the law applied to Chapter 11 consumer cases has been largely unsettled. If you are considering an individual Chapter 11 you would be best served to give us a call for a free consultation at 734-722-2999 Firebaugh & Andrews

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Do you have to worry about losing your job after bankruptcy?

People considering bankruptcy naturally worry how it will affect their current employment or job search. The answer is that there are laws protecting current employees from discrimination because of bankruptcy — but employers sometimes ignore them.

It is easier to legally discriminate against you when you are applying for a job than after you are hired — so long as the bankruptcy is not the sole reason for not hiring you.

You may worry less if you consider the positive aspects of hiring or retaining a worker who has declared bankruptcy. A bankrupt employee is a better risk than one who is still saddled with unpayable debt — the employer doesn’t have the hassle of garnishing wages from a bankrupt worker. Those debts have already been discharged.

Bankruptcy Discrimination Questions

These are three of the most commonly asked questions about employment and bankruptcy.

1. Will your employer find out about your bankruptcy, decide you are not the kind of employee it wants, and terminate you?

No. The Bankruptcy Code forbids employers from discriminating against employees solely on the basis of debt. An exception would be if you signed an agreement when you were hired to maintain an immaculate credit rating — in which case declaring Chapter 7 or Chapter 13 could be seen as a violation of your agreement.

2. Will a prospective employer, conducting a background check on you, discover the filing and cross you off its list?

Yes. Employers are on the lookout for a reason not to invest in you, and a rocky credit history may suggest to them you are not good with money, or that you might steal if you are hired. This is unfortunate. While prospective employers may factor your bankruptcy into their decision, it may not be the sole reason for rejecting you.

3. What if I don’t tell them about my filing?

It’s important to tell prospective employers the truth. If you are found out later, the omission can result in termination. Your employer will be on solid ground not because of the bankruptcy itself, but because you misled them.

Bankruptcy Planning Attorney Serving Westland And Metro Detroit

For more information about bankruptcy and discrimination, contact attorneys Firebaugh & Andrews at 734-722-2999 for your free consultation

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Michigan Chapter 7 Bankruptcy Facts

Recovery after the recession that started in the U.S. at the end of 2007 has been slower than expected and jobs have grown at a very inconsistent and patchy rate. Michigan was one of the 8 states that got hit the hardest by the recession due to huge layoffs and closures in the automotive industry. In 2009 the state lost over 280K jobs and unemployment rate was around 16%.
In this tight economy many consumers who have accumulated debt have been pushed to either seek debt relief or file for bankruptcy. Chapter 7 is generally the simplest and quickest form of bankruptcy and is available to individuals, married couples and companies.
So what is Chapter 7 bankruptcy? Here are the key points to bear in mind if you are considering filing for bankruptcy in the state of Michigan:
• It is a court process (known as “liquidation”) and one of the quickest and simplest ways to wipe out credit card, medical or other unsecured debts.
• In Chapter 7 bankruptcy the trustee will collect all of the debtor’s assets and sell any non-exempt assets.
• Michigan Exemptions – in the Michigan Chapter 7 there is a list of “Bankruptcy exemptions”. In most cases the debtor’s property is exempt so when you file for bankruptcy under Chapter 7 you are allowed to use Michigan state laws i.e. “exemptions” to safeguard your personal property. The trustee may sell your property only if it is worth more than what the exemption amount is.
• Non-Dischargeable Debts – there are some debts such as child support, alimony, student loans or some types of taxes that cannot be discharged in Chapter 7 in Michigan bankruptcies which means that you will still be accountable for paying these debts even after your discharge.
• Reaffirmation Agreement – if you sign a voluntary “reaffirmation agreement” you might be permitted to keep certain secured debts such as your furniture, car or house, however if you decide to do that you cannot wipe-out this debt again for another eight years – you will still owe it and will be obliged to continue with payments.

In conclusion, if you are considering filing under Chapter 7 Bankruptcy and are a resident of the state of Michigan, you should call Firebaugh and Andrews at 734-722-2999 for a free consultation.

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Protecting Your Assets in Bankruptcy: Michigan Property Exemption Laws

Property you get to keep*

The law of what has come to be called “Asset Protection” is actually a mixture of laws that allow you to keep certain property no matter what, even if you owe money to others. Every state has laws that designate specific property you get to keep so that you can continue living a productive life. That is, even if you owe a trillion dollars to someone, the law won’t make you sell the shirt off your back to pay it. And in Texas and Florida, they won’t even make you sell your million dollar mansion, or in Nevada, your gun.

These rules are called “property exemptions.” They vary from state to state. They designate what property is off limits to your ‘creditors ‘– the legal name for those who claim you owe them money.

Citations to exemptions

When you fill out your bankruptcy forms  you will be asked what property you claim as exempt — and a citation of the law that allows it.

This page gives you those citations and gives a brief summary of the exemption.

The help topics on the right provide additional information.

It is up to you to apply the correct citation to your property. If you have any questions, consult an attorney. If you own real estate, you should consult with an attorney about how the exemptions apply to your property.

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Applying The Bankruptcy Protection Laws To Your Advantage

There may seem to be a great deal of ads for bankruptcy protection, few people truly recognize what comes about or what their rights are. There are numerous television commercial messages and billboard ads that show that you can simply walk away from your financial obligations and from your troubles. But as most people knows, if it appears too good to be true then it likely is. Even though personal bankruptcy is perfect for many people, there are nevertheless numerous aspects that must be recognized so as to ensure that a consumer is genuinely making the correct conclusion for their financial position.

The first thing to remember is that you should Firebaugh and Andrews so the bankruptcy goes through without a trainload of problems. It is essential to ensure that your case is presented to the court that deals with bankruptcies in the correct light. If the case is not presented in the proper manner your personal bankruptcy petition could be denied and the money you spent filing is gone. After the court approves the bankruptcy you are now under the protection of the bankruptcy regulations.

The bankruptcy protection laws are meant to protect the person filing personal bankruptcy so that they are not harassed, sued, or in any way asked for payments from their creditors. In the beginning stages, until the bankruptcy is discharged the creditors are not allowed to telephone or collect on the debt they have with the person, even if it is a bankruptcy Chapter 13. There are laws in place that dictate that a person who filed for personal bankruptcy is not allowed to receive phone calls asking for money or have legal action, such as law suits or judgments, filed against them.

All collection attempts must stop until the personal bankruptcy courts state that it is okay to resume. This could be a couple of months from the date the bankruptcy was filed to a few years. Every case is distinct so there is not a clear-cut answer for how long a person will have the bankruptcy protection surrounding them. The several components include the personal bankruptcy Chapter filed, the state the bankruptcy is registered in, the disputes of creditors and other issues that could arise.

The foremost thing to do when thinking of filing bankruptcy is call Firebaugh and Andrews they can help to walk you through the processes. After we considers your bills and your debt, we can give a rough estimate of the timeline you will be considering. Other services they could provide should not be discounted, such as suggesting what choices you might have, and steps you might want to consider taking if you do indeed determine to file.

By realizing what to anticipate, you can better prepare yourself and realize what you will be facing. Also ensure that you find out how the laws are in your favor and what you can do if you continue to receive harassment from a creditor after they have been given notice that you have filed personal bankruptcy. The laws of bankruptcy protection are there for you to ensure that you know what your rights are.

Call Firebaugh and Andrews today for a free consultation at 734-722-2999 or visit us at www.MichiganBankruptcyFacts.com