FAQs | Chapter 7 and 13 Bankruptcy

What is the definition of “crazy”? Doing the same thing over and over and expecting a different result. So, you pay your credit card bill each and every month, (just like the Credit Card Companies want you to do) but does anything change? Is something different? Your balance is basically the same each month, thanks to the interest rate. Nothing has changed and that is exactly what the Credit Companies want.

So, if you want to get out of debt, then we need to try something different. Like filing for bankruptcy. Oh, well maybe I should do a debt consolidation or settlement company like the commercials say. The little secret about these companies are that they are doing the same thing you can do. These companies have you start paying them a monthly payment (which of course they take a fee from) which they start and account for you. Then when you have paid enough money in, they contact your creditors to see if they are willing to “settle” the account for a lesser amount that you owe. What they do not tell you is that during this period of time the Creditor can still attempt to collect from you and even SUE you! Also, there is no guarantee the Creditor will settle the debt! So it all might be for nothing.

Then if they do settle the debt and reduce the amount you owe, the last little thing is that the amount you don’t pay back, is INCOME to you that you will receive a 1099 for at the end of the year, that you will have to pay taxes on!

Filing for Bankruptcy takes care of all of these issues for you. Once you meet with a member of the HS&A, P.C. staff and we qualify you for Bankruptcy, we guarantee that all of your debt will discharged in bankruptcy. You will not have to pay any of it back and you will NOT have to pay taxes on any of it! Contact HS&A, P.C. to see if you qualify!

No, for several different reasons. The first being the bad press about bankruptcy comes from the credit card Companies. It is in their best interest to keep people from filing. Telling you several false things like:

a) you will never get credit again;

b) your interest rates will skyrocket;

c) you will never be able to buy a house etc.

They want to keep you and millions of others paying your minimum payments FOREVER! This is how their CEOs make millions of dollars a year. Off hard-working Americans paying their minimum balances forever!

The false things they push is FAKE! You can and will get credit after filing for bankruptcy (and here at HS&A, P.C. we help all of our clients rebuild their credit after filing – ask us how!) Your interest rates are probably not the best now if you are having financial strains, but with our credit rebuild program we give FREE to all of our clients we can and will fix your Credit Score. With eliminated debt and a re-built Credit Score you will be on your way to HOME OWNERSHIP in a short period of time!

Also, in the vast majority of bankruptcy filings, the person filing bankruptcy has already paid back the entire amount they borrowed plus a significant amount of interest by the time they file bankruptcy. So, even when you file bankruptcy, your creditors make a profit. Sounds crazy but it’s true. At some point you need to ask yourself, “Haven’t I already paid my debt?” And, “would I rather continue to pay on these debts for decades to come or use the money to save for retirement and give my family and myself the things we need and want?”

You are not a bad person, you have just been getting bad information from some very profitable, self-serving institutions.

Chapter 11 is debt reorganization primarily used by corporations and businesses. Unless you are seeking to file bankruptcy for a business, Chapter 11 won’t apply to you or your situation.

Chapter 7 bankruptcy is what many people think of as “regular” bankruptcy or “plain old” bankruptcy. It is a process by which people can eliminate their debts. If a person qualifies to file chapter 7, they become debt free in just a matter of a few months. You should contact a reputable law firm, such as HS&A, P.C., to see if you qualify for Chapter 7.

Chapter 13 on the other hand is a reorganization of debt. In most cases the person is not required to repay the entire amount owed, only a portion. The amount that is required to be repaid is based upon the person’s ability to re-pay. Everyone pays a different amount back. Whatever amount is not repaid during the Chapter 13 Bankruptcy is then “discharged” or eliminated and the person is debt free. Most people who file Chapter 13 Bankruptcy either have too much income to file a Chapter 7 Bankruptcy or they are behind on their house or car payments and they are attempting to keep those assets. You should contact a reputable law firm, such as HS&A, P.C., to see if you Chapter 13 Bankruptcy is right for you.

Bankruptcy is a legal process that eliminates your debt. What does that mean? It means it is a second chance for good people (like you) who have fallen on hard times to gain financial freedom. It allows you, through a reputable law firm, like HS&A, P.C., to either reorganize your debt or entirely eliminate it through the bankruptcy laws, while allowing you to keep all of your assets. (This includes your house, car, bank accounts and retirement accounts, along with many, many other things.

Under the bankruptcy code, student loans cannot be discharged in bankruptcy. However, there are two exceptions to this rule:

• If the loan is guaranteed by a government unit or is funded by a government or nonprofit institution, then it may be discharged
• If the debtor can prove that loan payment will lead to “undue hardship” on the filer, then the discharge can be granted by the bankruptcy court

To know if you are eligible for exemptions, it is best to speak directly to a bankruptcy expert in Michigan.

If you are married, you can file a bankruptcy petition on your own but it will not eliminate your partner’s liability to pay for joint debts. On the other hand, filing together can be more advantageous as you can double the number of exemptions that may apply to you. Check out the bankruptcy exemptions in Michigan to know which of your properties you may be able to keep.

If your creditor gives you approval, then you may be able to keep your current credit card. Although it may be hard at first to apply for a new credit especially for an unsecured one, you have the option of getting a secured credit card which will be backed by your bank account.

It is possible to wipe out all your debts as long as they don’t meet the criteria for being nondischargeable debt. The following types of loans are exempted from bankruptcy discharge:

• Child support or alimony payments
• Debts that are not declared on your bankruptcy petition
• Loans where it was proved that you defrauded the creditor by giving a wrong information
• Debts incurred due to harm that is willful and malicious
• Unpaid student loans
• Mortgages and liens that are not yet paid

When you file for a Chapter 7 bankruptcy, you are allowed to hold on to your properties which the law defines as exempted from creditor claims. Exemptions will usually depend on the value of the property, which is equivalent to its current worth and not its purchase price.
But even if your properties are exempted in bankruptcy, it can’t stop lenders from reclaiming collaterals or liens on your property. You can check the list of bankruptcy exemptions in Michigan to know if your properties can get protection.

Bankruptcy is not an all-time cure for financial burdens and it is not for everybody. This is why it is important to do your research or seek legal advice first prior to submitting your bankruptcy application. Although bankruptcy can help discharge or wipe out most of your debts, it cannot do the following:

• Bankruptcy can’t eliminate secured creditors from taking the mortgage or lien on a property as their loan collateral. Bankruptcy can only remove your obligation to give any more payments once your property has been seized but the only way for you to keep the collateral is to continue paying creditors what you owe.
• The Bankruptcy law states that you are still legally responsible to pay for the following debts even if you apply for bankruptcy: child support, alimony, student loans, taxes, and fines related to criminal activities or convictions.
• Bankruptcies can’t offer guaranteed protection for loan cosigners. If you applied for a loan and asked a relative to cosign, then even if your debt gets discharged through bankruptcy, the creditor may still go after your relative and demand for payment.

Unlike Chapter 7 bankruptcies, a Chapter 13 bankruptcy can help you keep your most valuable property, such as your home and car, rather than having to give them up just to repay your creditors. But in turn, you will need to file a payment plan which will indicate how you intend to pay off your current debts and missed payments in the next three to five years. Your plan should be approved by the bankruptcy court before it takes into effect.

Chapter 13 bankruptcies are a good fit for people going through the following circumstances:

• Facing the threat of losing their home due to financial problems
• Behind on their debt obligation but have a stable income that allows them to catch up on payments
• Owns valuable properties and assets that are non-exempt and plans to keep these Consult a bankruptcy lawyer near you prior to filing bankruptcy to make sure that you are applying for the right type.

When you submit a bankruptcy application under Chapter 7, you are essentially requesting the court to grant you a discharge of debts in exchange for giving up your nonexempt properties. Your state laws determine which properties are exempt and non-exempt in a bankruptcy case. Properties not exempted from the laws will be sold and the money is distributed to your creditors. Your bankruptcy case will close once you get a court order called a “discharge notice” which states that your debt obligation has been wiped clean. This type of bankruptcy may not be the best option for you if you have a house or a car loan that you intend to keep. You can consult with a Michigan bankruptcy attorney to get legal advice about which bankruptcy is for you.

Under bankruptcy laws, there are four general types of bankruptcies (called “Chapters”) you can file for. A Michigan bankruptcy lawyer can help clarify the differences between these chapters.

• Chapter 7 bankruptcy. Also called “straight” or “liquidation” bankruptcy, debtors filing for this type will be required to give up properties and assets that exceed your state’s limit or exemptions. The bankruptcy court will assign a trustee who will manage your properties under the bankruptcy estate, sell them, and use the proceeds to pay back your lenders.
• Chapter 13 bankruptcy. Also called a “debt adjustment” bankruptcy, this type allows you to catch up on late payments by proposing a new repayment plan which usually spans for a period of three to five years. However, the court will need to check that you are financially capable of meeting the terms under the new agreement with your creditors.
• Chapter 11 bankruptcy. This bankruptcy chapter is reserved for businesses facing the threat of closure or those who have not been making profits. A few individual debtors may be allowed to declare bankruptcy under this type if their debts are very large.
• Chapter 12 bankruptcy. This is a special type of bankruptcy reserved for family farmers.

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• Bankruptcy helps eliminate most (if not all) of your debt obligation through a legal process called the discharge of debts. As such, filing bankruptcy can give you a new start.
• Bankruptcy filings can prevent a home foreclosure as it gives you an extended period to catch up on your late payments. However, a bankruptcy will not eliminate the liens on the property nor does it eliminate mortgages automatically.
• Declaring bankruptcy helps stop a car from being repossessed, halt the garnishment of your wages, prevent creditors from harassing you for payments, or other collection activities.
• Filing bankruptcy can also help prove if your lenders are defrauding you by collecting more than what you really owe them.

If you are ready to file your bankruptcy petition, contact one of our Michigan bankruptcy attorneys to guide you through the process.