Even the hardest workers and the most diligent bill-payers can find themselves with more debts than they can pay as they become due. In such cases, filing bankruptcy may provide a solution to what seems like an insurmountable problem. If you or someone you know is facing serious financial challenges, it is very important to seek the counsel of an experienced bankruptcy attorney. Once considered a last resort, bankruptcy has evolved into an accepted method of resolving serious financial problems. The bankruptcy lawyer's goals are to help debtors make a fresh start and ensure that creditors get paid. A skillful attorney can guide you through the complicated legal maze of bankruptcy.
Bankruptcy law is primarily federal in origin and therefore varies little from state to state. The United States Constitution grants to Congress the power to establish uniform bankruptcy laws throughout the United States, which ensures consistency and predictability in how bankruptcy proceedings are conducted. The individual states do, however, retain jurisdiction over certain debtor-creditor issues that are not addressed by and do not conflict with federal bankruptcy law, such as which property remains exempt from creditors' claims.
Commercial and Consumer Bankruptcy
Both businesses and individuals may file for bankruptcy. Commercial bankruptcy is a remedy available to businesses that are unable to pay their debts. Options include liquidation, in which many of the business's assets are sold and the proceeds are divided among the creditors, and reorganization or restructuring, in which the business continues to operate according to a plan that allows for at least partial payment to creditors. Consumer bankruptcy, by contrast, is a method by which individuals may be able to get out from under insurmountable debt and make a fresh start, albeit with a negative impact on their credit ratings. As in commercial bankruptcy, there are two options: liquidating assets to pay off creditors, and filing a wage-earner plan that allows the debtor to retain more assets while working to pay off his or her debts. An experienced bankruptcy attorney can help you choose the right course of action for your particular situation.
Chapter 7 Liquidation
Bankruptcy law provides two basic forms of relief: (1) liquidation, and (2) rehabilitation, also known as reorganization. Most bankruptcies filed in the United States involve liquidation, which is governed by Chapter 7 of the Bankruptcy Code. To qualify for Chapter 7, an individual debtor has to satisfy a financial means test. In a Chapter 7 liquidation case, a bankruptcy "trustee" collects the debtor's "nonexempt" property (as opposed to the property that the debtor is allowed to keep and that is not subject to the creditors' claims) and converts it into cash. The trustee then distributes the resulting funds among the various creditors according to an order of priority described in the Bankruptcy Code. Not all creditors receive the full amount owed through this process; in fact, some may receive no payment at all. When liquidation and distribution are complete, the bankruptcy court may discharge any remaining debts of an individual (non-business) debtor. If the debtor is a corporation, it ceases to exist after liquidation and distribution, and there is therefore no reason for further discharge because the creditors cannot seek payment from an entity that no longer exists.
Chapter 11 or 13 Reorganization
In a rehabilitation or reorganization, the option often preferred by the courts, creditors may be provided with a better opportunity to recoup what they are owed. This type of bankruptcy is governed by Chapter 11 or Chapter 13 of the Bankruptcy Code. Chapter 11 generally applies to individual debtors with excessive or complex debts, or to large commercial
There were nearly 1.7 million bankruptcies filed in 2003, up 7.4% from the 1,547,669 filings in 2002. In fact, bankruptcy fillings have increased nearly 100% since 1994. To help sort your way through the complicated maze of overcrowded bankruptcy courts, you need the assistance of knowledgeable legal advocates, with years of experience and demonstrated trustworthiness.
Frequently Asked Questions about Bankruptcy
Q: Are there alternatives to filing bankruptcy?
A: If the debtor's financial problems are only temporary, he or she can simply ask creditors to accept lower payments or grant an extended payment schedule. Creditors may be receptive to these ideas if the debtor has been a prompt payer in the past or if they wish to avoid the inconvenience of a bankruptcy proceeding. Consumer credit counselors can also help creditors work out a repayment plan. Some of these advisors work for non-profit agencies, so they charge no fees, but others charge a fee or may even be unscrupulous and should therefore be avoided.
Q: Does a Chapter 13 bankruptcy discharge eliminate all debts?
A: A Chapter 13 bankruptcy discharges only those debts provided for by the plan. Any outstanding debt that is not in the plan will not be discharged. In addition, a Chapter 13 discharge does not affect outstanding debts or domestic support obligations; educational loans; drunk driving liabilities; civil restitution or damages for willful or malicious acts causing personal injury and debt; criminal fines and restitution obligations; and certain other long-term obligations that extend beyond the term of the plan, such as home mortgages; withholding taxes; un-filed or late-filed tax returns; fraudulent or willful evasion of taxes; debts incurred by fraud
Bankruptcy - An Overview
Even the hardest workers and the most diligent bill-payers can find themselves with more debts than they can pay as they become due. In such cases, filing bankruptcy may provide a solution to what seems like an insurmountable problem. If you or someone you know is facing serious financial challenges, it is very important to seek the counsel of an experienced bankruptcy attorney. Once considered a last resort, bankruptcy has evolved into an accepted method of resolving serious financial problems. The bankruptcy lawyer's goals are to help debtors make a fresh start and ensure that creditors get paid. A skillful attorney can guide you through the complicated legal maze of bankruptcy.
Bankruptcy law is primarily federal in origin and therefore varies little from state to state. The United States Constitution grants to Congress the power to establish uniform bankruptcy laws throughout the United States, which ensures consistency and predictability in how bankruptcy proceedings are conducted. The individual states do, however, retain jurisdiction over certain debtor-creditor issues that are not addressed by and do not conflict with federal bankruptcy law, such as which property remains exempt from creditors' claims.
Commercial and Consumer Bankruptcy
Both businesses and individuals may file for bankruptcy. Commercial bankruptcy is a remedy available to businesses that are unable to pay their debts. Options include liquidation, in which many of the business's assets are sold and the proceeds are divided among the creditors, and reorganization or restructuring, in which the business continues to operate according to a plan that allows for at least partial payment to creditors. Consumer bankruptcy, by contrast, is a method by which individuals may be able to get out from under insurmountable debt and make a fresh start, albeit with a negative impact on their credit ratings. As in commercial bankruptcy, there are two options: liquidating assets to pay off creditors, and filing a wage-earner plan that allows the debtor to retain more assets while working to pay off his or her debts. An experienced bankruptcy attorney can help you choose the right course of action for your particular situation.
Chapter 7 Liquidation
Bankruptcy law provides two basic forms of relief: (1) liquidation, and (2) rehabilitation, also known as reorganization. Most bankruptcies filed in the United States involve liquidation, which is governed by Chapter 7 of the Bankruptcy Code. To qualify for Chapter 7, an individual debtor has to satisfy a financial means test. In a Chapter 7 liquidation case, a bankruptcy "trustee" collects the debtor's "nonexempt" property (as opposed to the property that the debtor is allowed to keep and that is not subject to the creditors' claims) and converts it into cash. The trustee then distributes the resulting funds among the various creditors according to an order of priority described in the Bankruptcy Code. Not all creditors receive the full amount owed through this process; in fact, some may receive no payment at all. When liquidation and distribution are complete, the bankruptcy court may discharge any remaining debts of an individual (non-business) debtor. If the debtor is a corporation, it ceases to exist after liquidation and distribution, and there is therefore no reason for further discharge because the creditors cannot seek payment from an entity that no longer exists.
Chapter 11 or 13 Reorganization
In a rehabilitation or reorganization, the option often preferred by the courts, creditors may be provided with a better opportunity to recoup what they are owed. This type of bankruptcy is governed by Chapter 11 or Chapter 13 of the Bankruptcy Code. Chapter 11 generally applies to individual debtors with excessive or complex debts, or to large commercial entities like corporations. Chapter 13, by contrast, generally applies to individual consumers with smaller debts. Farmers and municipalities may seek reorganization through the Code's special chapters, Chapters 12 and 9, respectively. Reorganization provides debtors with a greater opportunity to retain their assets if they agree to pay off their debts according to a plan approved by the bankruptcy court. If the debtor fails to adhere to the plan, however, the court may still order liquidation.
Whatever the Chapter, the petitioning debtor must first undergo an individual or group briefing regarding credit counseling and budget analysis skills.
"Voluntary" and "Involuntary" Bankruptcies
Most bankruptcy cases are filed by the debtor and are thus considered "voluntary bankruptcies" (although few would "volunteer" to be in this position). Once a bankruptcy petition is filed, the debtor is immediately entitled to relief from creditors through the bankruptcy procedure known as the "automatic stay." The automatic stay freezes all debt-collection activity and forces creditors to allow the bankruptcy court to determine how payment will be made.
Not all bankruptcy proceedings are voluntary, however. Under Chapters 7 and 11, creditors, too, have the option of filing for relief against the debtor, in which case the proceeding is called an "involuntary bankruptcy." Involuntary bankruptcies are allowed only when certain minimum thresholds are met; for instance, there must be a minimum number of creditors and a minimum amount of debt. The debtor has the right to file a response to an involuntary petition, after which the court will determine whether the creditors are actually entitled to relief. If the court dismisses an involuntary bankruptcy filing because it has no merit, the creditors may be ordered to pay the debtor's attorneys' fees, damages for any losses the debtor experienced because of the bankruptcy, and even punitive damages to punish the creditors for the frivolous or abusive filing of a petition. An experienced bankruptcy attorney can provide essential advice whether you are a debtor considering voluntary bankruptcy or facing an involuntary bankruptcy proceeding, or a creditor seeking relief through an involuntary bankruptcy.
Conclusion
Lawyers specializing in bankruptcy law can help both debtors and creditors overcome obstacles to the repayment of debt. Their expertise often extends beyond bankruptcy to include debt repayment and collection options that can circumvent the need for a bankruptcy filing. Experienced bankruptcy attorneys have the knowledge and expertise to help their clients get out from under formidable debt and emerge as productive citizens, and can also assist their creditor clients in collecting what is rightfully theirs.
If you are considering filing personal bankruptcy, you may have many questions. How do know if it's the right thing for you? Can you prevent it? When should you contact a bankruptcy attorney? What are your options? How does one type of bankruptcy differ from another. This is when you need the services of a skilled bankruptcy lawyer. Walter Metzen is a Board Certified Consumer Bankruptcy Attorney in Detroit, Michigan.
Bankruptcy is a federal court procedure that helps individuals and businesses repay their debts under the protection of the bankruptcy court (Chapter 13 Bankruptcy) or wipe them out altogether (Chapter 7 Bankruptcy). When you file for bankruptcy, an automatic stay goes into effect that prohibits your creditors from taking action to collect the debt without the approval of the court.
The protection is immediate and automatic. That is, creditor collection action must stop immediately. Lawsuits, garnishments, repossessions, foreclosures must stop. Harrassment must also stop. Any action to collect on debts is stayed by court order.
The kind of relief you get depends on the plan you select. Chapter 7 cancels most debts and is for people that do not make enough money to pay on their debts. Under chapter 7 you can usually keep your home and car if you can afford to maintain the payments. Under chapter 13, a payment plan is proposed to reduce the burden of the debts by combining them all into a single affordable payment. The payment amount depends on a number of factors including how much money you make and what assets or property you want to keep.
Getting Ready to Meet with the Attorney It’s important to get your financial information together so that your attorney can give your case a thorough review. For this purpose we have a checklist of documents we need to review and a list of financial questions. We want to make a thorough review of the situation. You can download a document checklist and questionaire from our website or we can email or send it to you. We will go over all your debts, assets, income and living expenses. We will review what your situation is and advise the best course of action based on your specific situation.
When to Make the Appointment Many people put off meeting with a professional until they have already borrowed more money on their homes, from their retirement plans or made other unwise decisions. It’s best to make the appointment right away when your debts begin to get out of control. The sooner the better. If one waits too long it may be much more difficult or impossible to help. Each case depends on the specific situation so the best thing to do is get a consultation as quickly as possible.
What Happens at your Consultation? A good professional will take the time with you to gather the necessary information to find out exactly what needs to be done to help you. You will meet with an attorney who is qualified to deal with debt problems and bankruptcy. Our firm is unique in that we will review your income and expenses while you watch us put it on a large computer screen for you to follow along. In this way you can see how we evaluate your situation. You can follow us as we review your income and living expenses to see how much you make and how you spend your money. By knowing this, we can fashion a case to fit your circumstances. We find out how much you can afford to pay on your debts, and how your living needs impact your finances. After the interview is completed you can decide what is right for you based on our advice and we will explain to you how your case will help you.
How Can I get a Case Started Quickly? We can start your case on a rush basis if needed. We actually file your case on line so there is no delay in carrying documents to the Court. We get an immediate court order that protects you as soon as the case is uploaded. By being prepared for your appointment, you can make sure we will have all the information needed to get your case filed immediately. In order to file for Bankruptcy, you must first obtain a credit counseling "certificate." We can help you comply with this "certificate" requirement and find an approved non-profit credit counseling agency.
What Happens After the Case is Started? Each client will need to attend a meeting about a month after the case is started. The meeting is with an official, called a trustee, appointed by the Bankruptcy Court to review your case file. The trustee will want to review the doucments that pertain to your finances and which are listed on our document check-list. We will represent you at this meeting. We handle thousands of these cases so most cases are routine for us, even if it is a new and scary experience for you. If your case is a Chapter 13 payment plan, you would commence making payments (usually on a pay roll deduction) and continue to pay until the plan is completed. If your case is a chapter 7, your debts could be discharged in several months. In either case, most debts are cancelled or discharged when the case is completed. You must also attend a "Personal Financial Management" course by an approved provider. We can help with this process.
Some debts can't be discharged or "forgiven," including:
Debts you forget to list in your bankruptcy papers
Child support and alimony (maintenance)
Debts for personal injury or death caused by driving while intoxicated
Most student loans
Fines and penalties imposed for breaking the law, such as traffic tickets and criminal restitution
Most tax debts (although some taxes might be cancelled, others can be paid under a chapter 13 plan)
Debts incurred by fraud or misconduct
What Happens to my Home and Car? Many people fear they will lose their home or vehicle if they file for bankruptcy. In a Chapter 13 payment plan, you won't lose your home if you immediately start making your regular payments and the catch-up payments as stipulated in your repayment plan if necessary. If you are current on your home mortgage, this payment is normally “outside the plan” and is paid directly by you even while other debts are included in the payment plan. If you are behind on the house payment, the house is brought into the plan and extra payments are made to catch up the amount you are behind. It’s important to file your case right away to avoid foreclosure. Also the farther behind you are, the tougher it is to catch up over time.
In a chapter 7 bankruptcy, most people do not lose their home if they can make the house payments. Chapter 7 debtors are entiled to keep “exempt” assets. The amount a person is allowed to keep varies from case to case but if the case is handled properly, and depending on the value of the home and the amount of equity you have, you may have an excellent chance of keeping your home and other belongings. There are exemptions for home equity, vehicles, and household contents which a qualified attorney can go over with you to make sure you get the help you need without losing what is important to you. Only a qualified attorney is capable of advising you specifically how a bankrutpcy case will work for you.
Preventing Bankruptcies Many bankruptcies can be avoided by practicing good money management and avoiding debt when possible. For example, avoid impulse spending, don't use a credit card unless you have the cash to pay it off, and tear up credit card offers you receive in the mail. Be sure to stick to a realistic budget, don't buy more house than you can comfortably afford, make sure you're adequately covered by insurance (medical, homeowners, auto), don't make speculative or high-risk investments, and don't incur joint debt with others who have questionable financial habits. If you do find yourself behind on your bills, you can call your creditors before you get in too deep, but sometimes they will not work with you. Some people successfully use credit counseling services to help negotiate with creditors, but make sure the business is legitimate and reputable. We usually do not suggest you go to out of town agencies to help you with debt problems. Credit counseling can be of value for some circumstances but many times they will not be able to help in the way that chapter 13 or chapter 7 can. Credit counseling agencies may attempt to negotiate reduced payments and lower interest. Bankruptcy relief is far more dramatic in appropriate circumstances.
