Frequently Asked Questions about Filing for Chapter 7 & Chapter 13 Bankruptcy in Michigan
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What Does Bankruptcy Not Do?
Unfortunately, bankruptcy does not solve all debt matters.
- Bankruptcy does not stop a secured creditor from foreclosing or repossessing property that you cannot afford. A discharge may eliminate the debt, but it does not eliminate liens on property. It stays until the debt is paid.
- It does not eliminate obligations for child support or spousal support.
- It does not eliminate student loans, except in special situations. Student loans may only be discharged through bankruptcy if you are able to prove that paying the loan would cause "undue hardship" in your life.
- It does not eliminate a majority of tax debts.
- It does not eliminate other nondischargeable debts such as:
- debts involving personal injury or death due to drunk driving
- fines or penalties as a punishment for crime
- debts not listed in your bankruptcy filing
My son will be going to college; will this impact my ability to co-sign for his student loans?No. The Bankruptcy Code prohibits any government or private lender from denying loans to individuals on account of their involvement as a debtor in a bankruptcy case, or their association with someone who is a debtor in a bankruptcy case.
I am going to need a new car soon, but need to file for Chapter 13 now. Will I be able to get approval to do this while in a casYes. Obtaining a new lease or financed vehicle is easy to do while in Chapter 13. You can also obtain permission to refinance a mortgage on your home or enter into a loan modification agreement while in Chapter 13.
I have a foreclosure sale scheduled in just a few days’ time. Is it too late to file a bankruptcy to stop this from taking placeNo, it is not too late to file bankruptcy if the foreclosure sale is in a few days. If you need additional time to gather your paperwork but need to file a case immediately, we can likely file your case on an emergency basis. This provides an additional two weeks to file the remainder of your schedules and statements.
Can I pay for my bankruptcy in installments?No. As your bankruptcy counsel, we must receive a retainer and the court’s filing fee in order to file your case. We cannot list ourselves as a creditor in your case, so our retainer must be paid in full before we file. We understand that saving the funds to retain quality legal counsel can be a challenge; for this reason, we do not determine a fee in your case until we evaluate your circumstances during your initial free consultation.
I made my daughter an authorized user on my credit card. Is this going to impact her credit?No. Any authorized users on your lines of credit are using credit attached to your social security number, not their own. If you have a true co-signer on a debt to be included in your case, they may be liable for the credit card debt.
Will I ever be able to buy a house or a car again?Yes! Your credit will begin to be restored soon after filing for bankruptcy. After a case, any debts you discharged will be removed from your credit report, and any debts you kept long-term, such as a mortgage or a car loan, will remain on your credit report. By changing your debt-to-income ratio, which the credit reporting agencies use to determine your score, you will see your credit improve quickly. Most consumers find that they will be able to finance a house with an FHA loan 2 years after receiving a Chapter 7 discharge.
Is everyone I know going to find out that I filed for bankruptcy?Bankruptcy filings are public records that anyone can access. Creditors, including any individuals to whom you owe money will receive notice of your bankruptcy. Your family and friends often do not have to find out.
Can I file for bankruptcy if I am unemployed?The ability to file for bankruptcy is not dependent on employment status. However, there are some things to consider:
How long have you been unemployed? Timing is everything. You may qualify for a particular type of bankruptcy relief based on your sudden reduction in income.
Will you incur more debt before finding a new job? All debts that you owe at the time of filing a case will be included in bankruptcy. Any new debts that you take after a case is filed will remain your responsibility to pay.
Why should I consider filing for bankruptcy as a first step after becoming unemployed? Filing bankruptcy will prevent judgment liens from seizing your state tax refund. A bankruptcy will also protect your bank account from garnishments, and federal tax liens.
How can I afford to file for bankruptcy if I am unemployed? Suspend payments on your unsecured debts once you decide to file a case. Use cash and debit for the essentials: food and necessary utilities. Save up a small reserve to help get you out of debt, or consider drawing a small amount from a protected retirement asset. Taking this proactive measure will protect your future employment income from the threat of garnishment once you go back to work. Every case is unique.
How do I know if I should file for bankruptcy?You are facing foreclosure. In many cases, you are able to keep your home even after filing for bankruptcy. A Chapter 13 bankruptcy can give you the time to catch up on mortgage payments.
You are using credit card to pay for necessities. Filing for bankruptcy can help break the cycle. Most of the time, credit card debt is wiped out in a Chapter 7 bankruptcy.
Your wages are being garnished. Wage garnishment happens when a court issues an order requiring part of your paycheck be sent directly to a creditor that you owe until the debt is resolved. Chapter 7 bankruptcy can end the garnishment permanently.
You have considered all other options. Most people consider bankruptcy as a last option after they have pursued other alternatives, like debt consolidation or withdrawing funds from a retirement account. Debt consolidation doesn't stop the accrual of interest. Retirement accounts are protected in a bankruptcy case. Don't wait until it is too late to consider your bankruptcy options.
How much does a bankruptcy cost?The cost of bankruptcy depends completely on the individual's circumstances. With a free consultation, we can discuss your current situation and determine the type of bankruptcy that is best for you. Once we know more about your case, we can give you a fee quote. We are proud to offer our legal services at a reasonable cost. Schedule a free consultation with us here or call us at (248) 609-1855.