Five Questions to Ask Yourself Before Filing for Bankruptcy
Filing for bankruptcy is not something to be done lightly, and it is far from the only solution for every problem. Filing for bankruptcy is not the best option for everyone, and it’s not a quick fix.
However, if you are having trouble making ends meet due to an overwhelming number of creditors as well as difficult-to-pay medical bills, filing for bankruptcy may be the best option for you.
Common questions about filing for bankruptcy
Before you decide to file for bankruptcy, you must ask yourself the following questions:
1. Do I understand what filing for bankruptcy will do?
If you file for bankruptcy, it might be possible to stop the foreclosure on your property or mobile home and allow you to catch up on past payments.
Bankruptcies may also stop wage garnishment, debt collection harassment, and other creditor actions to recoup a debt.
A bankruptcy “discharge” of obligations occurs when you finish the bankruptcy. It may be possible for you to get rid of the obligation to pay most or all of your bills after bankruptcy. The discharge of debts is intended to provide you with a fresh financial start.
The ins and outs of filing bankruptcy
A bankruptcy will allow you to refute claims filed by creditors who have committed fraud or are attempting to collect more than you owe.
However, there are a few things that people frequently say bankruptcy will assist them with, such as eliminating your property’s obligations and liens, which is not the case.
The solution is to engage a reputable bankruptcy lawyer who can assist you in determining whether or not personal bankruptcy is appropriate for you based on your current financial situation.
2. Will bankruptcy give me the fresh start I need?
In Michigan, most unsecured debt may be canceled. However, this is not the case for all debt obligations.
Alimony and child support are two examples of this. Almost recent outstanding income tax liability is also included in this category.
Unsecured debts like fines and penalties for breaking the law, luxury goods or service purchases made right before the bankruptcy filing, and most tax debts on your bankruptcy petition will not be erased.
It is a good idea when you file for bankruptcy and debt relief to have an attorney that understands bankruptcy cases to help you file correctly. Look for a small law firm that can offer you a free evaluation and where you can build a real confidential relationship.
3. Can I afford to file for bankruptcy?
It is critical to understand how much it will cost you to file for bankruptcy in Michigan and how to pay for it.
The Court filing fee for a Chapter 7 bankruptcy in Michigan is $338. The Court filing fee for a Chapter 13 bankruptcy is $313 in Michigan.
If you can’t afford to pay and owe money, you may ask for payments or the fee to be waived completely if you meet certain income requirements set by the federal government.
You may apply for a fee exemption if your annual income is less than 150% of the poverty level in Michigan. You can discover more about it on this site: https://upsolve.org/mi/.
How to manage to pay for filing bankruptcy in Michigan
If your court waiver request is denied or you are unable to pay the full fee, you may apply for installment payments.
This is an alternative that individuals employ when they need to file fast to avoid creditor action, such as wage garnishment. The automatic stay goes into force as soon as you submit your case, preventing wage garnishment and other collections.
If you miss a payment, the court might dismiss your bankruptcy case and you will not get your money back. That is why it is important to wait until you have enough money to pay the full court fee so you don’t risk a dismissal.
It pays off to have a good attorney-client relationship through bankruptcy
Once again, even if you have to add the attorney fees, having a professional bankruptcy attorney guide you through the bankruptcy process is your best bet so creditors stop calling you and you receive bankruptcy relief soon.
4. What are the long-term effects of bankruptcy?
The procedures you select will produce varied outcomes, depending on the type of operation you pick.
The goal of bankruptcy is to eliminate debt, but the amount of debt that can be canceled varies based on each person’s circumstances.
One, future credits
In the long run, each bankruptcy type has a different impact on the individual, with credit being one of them. After a person files for bankruptcy, their capacity to get new credit from financial institutions is typically diminished.
It’s possible that taking out another loan will be difficult for you. Financial institutions are typically hesitant to lend money to someone who has gone bankrupt.
Two, marks on your credit score
If you file for Chapter 7, it will be recorded on your credit report for the following 10 years. The debtor is liquidated through Chapter 7.
Nevertheless, when you check your score in the future, it will take into account all the good things you’ve done to improve your credit since bankruptcy.
Three, the law that governs bankruptcy is complicated.
When you file your bankruptcy petition with a law firm by your side, you will know that the specific bankruptcy questions for your case will have been well answered.
Not only that, attorneys evaluate all your monthly income, how much debt or medical bills you have, whether it is a car loan or monthly expenses.
Do not face the bankruptcy courts alone if you can prevent it
With this information, including your retirement funds, your business debt (if it is such), and any other personal loans or credit card debt you might have, they can offer solid legal advice that will guide you safely through a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.
How to file bankruptcy in Michigan?
In Michigan, bankruptcy is filed under federal legislation rather than state legislation.
Filing bankruptcy relieves you of your obligations to creditors, which is what gives you a second chance.
Michigan’s rules apply in a bankruptcy proceeding to determine what property you can keep.
The majority of consumers file either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. If you’re unfamiliar with the distinctions between the two or if you have any other bankruptcy questions when deciding to do your bankruptcy filing, look for legal advice.
Benefits of having an attorney during the bankruptcy process
A bankruptcy attorney can guide you to do what is best to get rid of your secured debts and unsecured debts, as well as explain the bankruptcy code and federal law according to your case.
Many people have discovered that they don’t need to file bankruptcy because there are other alternatives to debt collectors. These alternatives lead you to a repayment plan where you can keep your retirement savings, bank accounts, and personal property intact.
Do student loans end up in bankruptcy in Michigan?
If you live in Michigan, you can discharge your student debts through bankruptcy, but there are a few things to keep in mind first.
With few exceptions, student debts obtained from the federal government and private lenders are not dischargeable in Chapter 7 or 13 bankruptcy without the showing of an extreme hardship that must be proven through a separate lawsuit in the bankruptcy.
If you have any of these obligations, they won’t go away if you write them down in your petition.
Chapter 11 can be the solution
However, if you file for Chapter 11 bankruptcy protection, you may be able to get rid of both federal and private loans that are stalling your progress toward financial independence.
This type of filing lets you keep your assets and repay your debts differently. This includes student loans that were consolidated under one lender’s repayment plan before you filed Chapter 11.
The majority of Michigan citizens who choose Chapter 11 do so because their finances were not bad enough to necessitate the filing.
What is the Bankruptcy Abuse Prevention and Consumer Protection Act?
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) states that student loans are only dischargeable in bankruptcy upon the Debtor proving the inability to repay the student loan due to extreme hardship.
Even though you may owe a lot of money, you may still have to repay these loans. It rendered certain educational debts nondischargeable in bankruptcy.
Don’t go to bankruptcy court on your own
If you are thinking about filing for bankruptcy, it is a good idea to contact an experienced Michigan attorney instead of trying to do it yourself. A lawyer can assess your situation and give you advice based on your individual needs.
What should I know about bankruptcy court in Michigan?
A bankruptcy court is a specialized component of the federal court system.
There are two jurisdictions for federal bankruptcy courts in Michigan: the U.S. Bankruptcy Court for the Eastern District of Michigan and the U.S. Bankruptcy Court for the Western District of Michigan.
There are many of these courts in each district. At least one bankruptcy court exists in every state.
Kinds of bankruptcy
The three most frequent types of bankruptcy proceedings are:
- Chapter 7 for liquidations
- Chapter 11 is most commonly used for corporate reorganization.
- Individuals with steady income might find Chapter 13 debt bankruptcy relief beneficial. It includes re-organizations for people who have regular earnings.
At the end of the procedure, each case aims to get rid of (or cancel) the debtor’s obligations.
When does a bankruptcy begin?
Chapter 7 or 11 bankruptcy may be filed by individuals or businesses. Only individuals are allowed to file for Chapter 13.
When a petition is submitted to the bankruptcy court, the process of declaring bankruptcy begins. There are some court filing fees you have to cover.
How to find the best bankruptcy attorney?
In Michigan, a bankruptcy petition’s debtor is generally represented by an attorney.
An attorney might also act as the Chapter 7 trustee’s representative. However, in many situations, the Chapter 7 bankruptcy trustee is an attorney.
An attorney may represent the creditors’ committee in Chapter 11 proceedings. In most cases, Chapter 13 trustees are attorneys as well.
What to avoid when hiring a lawyer to file for bankruptcy
When looking for a lawyer, beware of paid attorney advertising or attorney listings.
Since you will be sharing sensitive or confidential information (like what you have in your bank account, how much is your tax debt, if you can pay child support or your total monthly income) with your lawyer, it is always better to find someone by personal recommendation.
Tips to hire a good bankruptcy attorney
Although you can file bankruptcy on your own for free in Michigan, using a lawyer referral service is not a bad idea. Any bankruptcy case can get better debt relief when going to bankruptcy court if you have legal advice.
When you give your contact information, choose attorneys to contact you back. Although message and data rates may apply, you will be sure this law firm is interested in representing you.
Ask your attorney the correct questions so you find someone that is on your side, that will be available for you to answer anything, from the court mails to find out about the bankruptcy exemptions that apply for you.
Filing a bankruptcy petition or going through a repayment plan is not the end of the world. With a professional and experienced lawyer by your side, you will be able to get through it and start over.