Is Alimony Dischargeable in Bankruptcy?

Alimony, also called spousal support, domestic support obligation, or maintenance, is a payment from one ex-spouse to another. The payments are typically made after a divorce or legal separation. Alimony can be ordered by a court or agreed upon by the divorcing parties. The spouse who is paying the bills is called the “supporting spouse” that contributes funds to the “dependent spouse”.

Alimony, like child support, is a domestic support obligation that cannot be eliminated in bankruptcy. How can a person afford alimony? Filing Chapter 7 or Chapter 13 bankruptcy might allow an alimony payer to get other debts erased and make the alimony payment more affordable.

How is alimony paid?

Alimony is money paid to a spouse or former spouse after a divorce to assist with ongoing living expenses, such as food. It may be paid in one lump sum or regularly, such as weekly or monthly.

Typically, alimony is paid every month. A judge will sometimes command a spouse to pay a specific sum of money to the other spouse as maintenance, such as in cash or through the transfer of property (separate from the regular process of dividing the couple’s marital property).

Is alimony an unsecured debt?  

Unsecured debt is debt that does not have any collateral pledged to the creditor. In certain loans, such as mortgages and automobile loans, if payments are not made on time, the lender has the legal right to seize the debtor’s property.

An obligation to pay alimony is not suspended or halted by filing for bankruptcy. Whether a divorce decree-determined duty is dischargeable depends on whether it is classified as support or property settlement.

In many cases, obligations for property settlement may be canceled in bankruptcy, but alimony payments can’t. Whether an obligation is a support or property settlement obligation is made by federal bankruptcy legislation rather than state law.

How does debt affect alimony?

A judge will consider numerous factors when determining whether or not to award alimony, including the paying party’s financial situation.

In certain circumstances, a judge will demand one spouse to reimburse the debts of the other as alimony. In other situations, a judge will forgo ordering alimony if the paying spouse would incur greater debt paying alimony.

If you’re receiving alimony, you must reveal how much money you receive each month. Take the last six months of receipts and calculate the average monthly amount if your payments fluctuate.

Means test and alimony

The means test is based on your income, which alimony payments may impact. Alimony obligations aren’t discharged in bankruptcy. The automatic stay, however, might influence a debtor’s obligation to pay alimony during a pending bankruptcy case. Filing for bankruptcy may also impact any changes to alimony terms.

In any case, there are a few exceptions to the application of the automatic stay. One such exception is alimony claims in court. As a result, the automatic stay will not prevent the commencement or extension of a legal action related to alimony payments in civil or family court as long as it does not involve the non-filing spouse seeking to distribute property that is part of the bankruptcy estate.

If a debtor’s income is being withheld as the consequence of an administrative or judicial order for family support duties, it will continue even if he or she files for bankruptcy. Wage garnishments will not be stopped by the automatic stay in this instance.


What debts are not dischargeable in Chapter 13?

The following debts are not discharged in a chapter 13 bankruptcy:

  • A home purchase or mortgage is one of the most important long-term financial commitments you’ll make.
  • Certain debts for alimony or child support, income taxes that have been assessed within the 3 years before your bankruptcy filing, government-funded or guaranteed educational loans, and benefit overpayments are not dischargeable.
  • Personal expenses resulting from death or personal injury caused by a driver who was intoxicated

Can you go to jail for not paying alimony in Michigan?

Failure to pay spousal support may result in a host of penalties, including civil and/or criminal ones. A person can be charged with a felony in Michigan and face up to four years in prison if they do not pay alimony on time or in the amount set by the court.

Spousal support is not always given in a divorce case, according to Michigan divorce law. If one spouse asks for spousal support and the couple cannot agree on assets or property division, the court must rule on whether spousal support is required.


Gambling While in Chapter 7

Technically, you are allowed to gamble while in Chapter 7 bankruptcy. However, there are a few things that you need to keep in mind if you do choose to gamble while amid your bankruptcy case.

First and foremost, any money that you win while gambling will become part of your bankruptcy estate. This means that your creditors will be able to take a portion of your winnings to pay off your debts.

Additionally, if you have a gambling addiction, it is important to get help for this before you file for bankruptcy. This is because gambling can lead to even more debt, which can make it more difficult to get a discharge in your bankruptcy case.

How good is gambling for your wallet?

The gambling industry claims that the gambling business is a socially beneficial one with both economic and non-economic benefits. It is claimed that gambling creates wealth through job creation, consumer spending, and increased tax revenue. However, the economics of gambling are debatable.

The correlation between gaming and gambling debts to bankruptcy filings is unclear. Some studies claim that gambling is either a major reason or a contributing factor in bankruptcy filings. It also says that 10% to 26% of problem gamblers file for bankruptcy.

Regulations on gambling

Gambling is not mentioned in the US Constitution, and therefore it does not fall under federal jurisdiction. The 10th Amendment reserves the right to regulate gambling in the states.

Congress has enforced the Interstate Commerce Law to limit both interstate and international gambling.

Each state has the authority to prohibit or legalize the practice within its boundaries. Almost every state, if lotteries are run by the government, can be considered to allow some degree of gambling.


Gambling and bankruptcy

The goal of bankruptcy is to separate the innocent but unfortunate debtors from those who have committed various types of culpable actions.  This is accomplished by forgiving the debts of the former and holding the latter accountable through different types of bankruptcies.

If the debtor has lottery tickets or other similar gambling property, they must be reported. Gambling winnings that were acquired at the time of filing are a part of the estate’s assets and must be disclosed.

Difference between non-gambling debt and gambling debt

Unsecured debt, such as gambling debts, is unsecured and should be written off completely in a chapter 7 bankruptcy and placed behind secured debts in a chapter 13 repayment.

Sometimes, creditors may fight back and protest the debt being forgiven.

Gambling debts are frequently defined as unsecured debt since they are not secured by any property. This makes them comparable to credit cards or medical expenses. As a result, gaming debt is typically dischargeable in bankruptcy.

However, there are some exceptions to this rule. If you incurred your gambling debt while you were intoxicated or if you gambled intending to incur debt, then your gambling debt may not be discharged in bankruptcy.


Gambling addiction

Additionally, if you have a gambling addiction, you may want to consider getting help for this before you file for bankruptcy. This is because gambling can lead to even more debt, which can make it more difficult to get a discharge in your bankruptcy case.

Are gambling debts dischargeable in bankruptcy?

It wasn’t long ago that bankruptcy courts routinely rejected gambling debts as non-dischargeable. However, more recently, and perhaps as a result of the increase in permitted gambling in many states, the courts have begun allowing debt discharge.

Gambling debts are dischargeable in bankruptcy, just like other types of unsecured debts such as credit cards and personal loans. Certain gambling debts, on the other hand, may be exempt from discharge under certain circumstances.


In conclusion, gambling is not illegal while in Chapter 7 bankruptcy, but there are some things that you need to keep in mind if you do choose to gamble. Any money that you win while gambling will become part of your bankruptcy estate and your creditors will be able to take a portion of your winnings to pay off your debts. Additionally, if you have a gambling addiction, it is important to get help for this before you file for bankruptcy.


Can I get charged with fraud for declaring bankruptcy due to gambling debt?

A creditor may challenge your bankruptcy filing if they believe that you incurred your debt under pretenses or by fraud. Gambling is viewed as fraudulent for debtors if they intend to use it to avoid creditors from getting money. When a debtor gambles during bankruptcy, all of his or her debts become non-dischargeable. As a result, the debtor will be required to pay off all of his or her post-bankruptcy obligations, not just gaming debts.

Do I have to report my gambling debts or wins?

All winnings from lotteries, raffles, horse races, casinos, and other forms of gaming are taxable. Non-cash awards such as automobiles or holidays are valued at their market value.

Gambling losses are also tax-deductible to the extent of your winnings, but they must be declared as taxable income on your tax return. Gambling profits are completely taxed and must be shown on your income tax return.

Who can help me understand bankruptcy and gambling?

If you have any questions about gambling while in Chapter 7 bankruptcy, be sure to speak with your bankruptcy attorney. They can give you specific guidance on how to handle this issue in your particular case.


All You Need To Know About The 90-Day Clawback Period

When you file for bankruptcy, the court issues an automatic stay. This means that creditors are no longer allowed to contact you or try to collect debts. The automatic stay is in place for the duration of your bankruptcy case.

However, there is one exception to the automatic stay: the 90-day clawback period. It is the time frame during which a bankruptcy trustee attempts to recoup cash from creditors.

Read on to find out more about how the 90-day clawback period works.

What is the clawback period?

This 90-day period begins on the date that you file for bankruptcy. During this time, the trustee has the right to demand payment from creditors. If a creditor does not comply with the trustee’s request, the trustee can take legal action to recover the money.

Section 547 of the Bankruptcy Code allows a trustee to sue creditors who were paid by the debtor before filing for bankruptcy. The aim is to regain any unlawful benefit that the creditor acquired.

Why does the clawback period exist?

The power to reclaim money that the debtor has previously given away improperly is known as “clawback.”

The beneficiary is liable for any excess or unauthorized payments made during the bankruptcy proceedings. This clawback allows the trustee to recoup assets that should have been part of the debtor’s bankruptcy estate but were eliminated or hidden from the trustee by fraudulent transfers or preferential transfers.

It’s not a question of whether the debtor committed a crime or that the debt was fraudulent. It’s about seeking fairness for both secured and unsecured creditors in the end.

A trustee may usually ask for the return of money paid by the debtor to third parties within 90 days of the bankruptcy filing.

What are preferences?


Preferential transfers (also referred to as preferences) happen when one individual’s debt is paid off ahead of time so that it benefits one creditor above others. This includes both a secured creditor, a family member, a business partner, or anyone else.

For example, if a debtor repays $1,000 owed to his credit card debt 60 days before filing for bankruptcy, it will be considered a preference,  since the credit card debt got paid first.  If a debtor repays $1,000 owed to his father 200 days before filing for bankruptcy, then it will be considered an insider preference. The Trustee can clawback up to one year to recover any insider preferences.

A court-appointed trustee or the other creditors in the case have the power to request that all payments made by the debtor to third parties 90 days before the case’s commencement be returned or “clawed back.”

Are most payments preferences?

The preference recipient’s bankruptcy law provides some protections.

A contemporaneous exchange is not a preference. So, if you pay for the food you ate at a restaurant and the goods and payment for those goods change hands at the same time, there is no preference.

How much money is considered a preference?

Payments totaling more than $600 in the 90 days before filing are avoidable by law. However, it is not worth pursuing creditors for $600.

The sum is undoubtedly more than $600, but each trustee has her guideline for when a preference can be recovered to provide a dividend to creditors.

What is the preference period?

The bankruptcy trustee does not have an infinite amount of time to work in. The 12 months leading up to the date you file bankruptcy for payments made to friends and relatives, known as “insiders,” is your “preference period.”

For other unsecured creditors, such as past-due utility payments or an unsecured credit card, the period for preference payment is even shorter.

The debtor’s bankruptcy estate

If a debtor decides to transfer the title of an asset before filing bankruptcy, the item may be reclaimed from the estate under the clawback provision.

In some instances, the bankruptcy trustee assigned to manage the debtor’s financial affairs can get these pre-bankruptcy belongings back from people or businesses who received them.

In bankruptcy, the clawback provision allows trustees to look at financial transactions made by the debtor before filing bankruptcy to see whether he or she transferred or gave away any assets in violation of the “look-back period.”

The trustee can reclaim these assets, or their value, for the debtor’s bankruptcy estate from any other creditors who received them.

Not all preferences are the same everywhere

Keep in mind that preferential payments are a bankruptcy-specific law. This means that the rules may vary from state to state. For example, according to California state law, a debtor has the right to choose and select among his creditors. In Michigan, Chapter 7 trustees can claw back up to 6 years on fraudulent real estate transfers. 

It is advisable to seek the counsel of a bankruptcy attorney in your area to discuss your particular circumstances and the law as it applies in your jurisdiction. Establishing a safe attorney-client relationship can help you understand nuances in the bankruptcy code that are only known to a professional law firm.

How does the bankruptcy trustee recover preference payment?

The trustee has the authority to void or “clawback” certain payments made by the debtor in the 90 days before bankruptcy. This includes payments to friends, family, and businesses owned or controlled by the debtor within the last year. The trustee can also recover assets transferred by the debtor during this period.

When a transfer was made in return for anything that adds to or does not deplete the debtor’s assets, it will be avoided by a trustee.

The new value is something that can be given in exchange for a property. It can be cash or a release of a judicial lien. It doesn’t include the swap of an existing obligation for a new one.

Will a bankruptcy filing help my financial distress?

Bankruptcy may help you if you are struggling to pay your credit card company, car loans, or any antecedent debt. It can give you a fresh start by discharging some of your debt and reorganizing your remaining debt.

Although you can do a bankruptcy filing on your own, it can be extremely helpful to hire a bankruptcy lawyer or law firm to be by your side when going to bankruptcy court.

Attorneys evaluate your case, investigate your pre-bankruptcy payments, check your total debt owed, and help you see if you qualify for debt relief.

An attorney-client relationship keeps sensitive or confidential information safe and many debtors feel better than using any other self-help services when facing a complicated bankruptcy case.


Will the clawback period necessarily secure money for the debtor in bankruptcy?

If you’re considering filing for bankruptcy, it’s important to understand how the clawback provision works and how it may affect you.

In many circumstances, payments made within the 90-day preference period were not preferential, as recognized by most trustees.

Debtors may try to move property or cash to family members or “insiders,” intending to hide the assets “safe” until the bankruptcy case is over. The trustee may suspect a preferential payment and investigate the transfers.

If it is determined that this preferential transfer is a fraudulent conveyance, the trustee can void the transfer and get the property back for the benefit of the debtor’s creditors.

So beware of realizing any preferential or fraudulent transfers to save either your business or financial affairs when you pay creditors.

What can a creditor do not to lose money?

Typically, creditors must engage legal help to defend or settle preference claims, although various defenses may be used by creditors.

A lender who makes preferential payments has the right to file an unsecured proof of claim against the bankruptcy firm, but typically receives a minor portion of his or her money back.


In conclusion, the clawback can help the debtor in bankruptcy by getting assets back that were transferred during the 90 days before filing. The trustee may investigate and void any fraudulent conveyances. Creditors can use a variety of defenses to protect themselves from losing money, including the ordinary course of business defense or the new value defense.


Should I Tell Creditors I Am Filing Bankruptcy?

The answer to this question is generally no. When you have a lot of debt (from credit cards, personal loans, medical bills, or a car loan), expect to receive more calls from creditors than you’d like. It isn’t very pleasant to feel like your phone has been taken over and you’d want the calls to stop.

Unfortunately, informing your creditors that you want to file for bankruptcy is unlikely to work. They can continue to reach out to you. One of the benefits of simply retaining a bankruptcy attorney is that your creditors will now be required to contact your attorney and by law must stop contacting you or face possible court sanctions.

You are not required to notify your creditors that you are planning to file bankruptcy; in fact, it may be in your best interest not to do so. However, there are a few exceptions to this rule, so it’s important to talk to an experienced bankruptcy attorney before making any decisions.

Here are some of the cons of giving creditors information about your financial situation and a possible bankruptcy process.

Potential adverse effects of notifying your creditors

No assurance threatening to file bankruptcy will deter creditors from calling you. The only surefire way to prevent this is actually to hire a bankruptcy attorney. Once you file the bankruptcy case with your attorney the “automatic stay” (i.e., the bankruptcy protection) comes into play, effectively freezing any attempts by your creditors to collect money owed.

Creditors are aware of the potential consequences of committing a violation and usually cease taking any further collection efforts. You should be careful to inform a creditor of your bankruptcy intentions because the creditor may intensify its efforts to get money out of you before it’s too late. Finally, no one knows what the creditor will do next, such as filing a lawsuit against you.

Yet beware of unfair debt collection!

The Fair Debt Collections Practices Act (FDCPA), a federal statute, prohibits debt collectors from using abusive methods to collect a debt.

Under the FDCPA once you simply retain an attorney to assist you with your debt obligations, then the creditor must only contact your attorney representative to discuss or resolve the debt. It also sets boundaries for creditors to prevent them from calling you in the middle of the night or from calling you an unreasonable amount of times.

Harassment from a debt collector is never OK. If you are scared, write to the firm and request that they cease calling you. If you ask them to stop contacting you, they are required by the FDCPA to comply.

How to stop phone calls and creditor harassment

A debt collector is limited by federal law from employing any deceptive, fraudulent, or misleading means to collect a debt. For example, misrepresentations about the debt are illegal under this legislation.

If you sue under this federal law and win, the debt collector will usually have to pay your attorney’s fees as well as damages. Of course, in this case, they can no longer contact you with any more collection calls.

Negotiate down the debt by working with the secured creditor or lender

If you owe money and manage your creditors yourself rather than employing a for-profit debt settlement firm, you may save a lot of money.

After you’ve decided to pay a debt, it’s time to figure out what you can afford. Take a good look at your finances.

Negotiating a settlement

Set a firm stance with certain creditors when you go to the bargaining table. Debt collectors and creditors are not allowed to threaten you with arrest or state that you will be arrested if you don’t pay your debt.

Be wary of the particular creditor that claims to be government contractors or subcontractors for government agencies like the IRS.

Some debtors consider that hiring a bankruptcy lawyer is a good idea for this negotiation. Since most bankruptcy attorneys know the ins and outs of the bankruptcy code and offer a free consultation, a debtor may visit them to decide if a bankruptcy attorney can be of assistance.

Advantages of settling a debt with a law firm

If you go to a free consultation with a lawyer, even before you talk about filing for bankruptcy, you can ask for assistance and discuss how to settle your debt. The main advantage of doing this is that you can get honest and accurate legal advice.

A bankruptcy attorney also might be able to get a lower settlement amount from the creditor than you could on your own because they are familiar with the law, have likely settled similar debts in the past, and creditors recognize that filing for bankruptcy is a legitimate possibility.

Working with a bankruptcy attorney provides you with protection from unlawful debt collection tactics, as well as confirmation that the calls and harassment will cease.

The attorney-client relationship has other great advantages like forming a solid strategy and providing an overview of all the options available to you.

How to hire a bankruptcy attorney for a bankruptcy filing to stop collection activities

You can find bankruptcy attorneys through online directories, word of mouth, or by contacting your state’s bar association. Once you have a list of potential candidates, set up consultations to get more information about their experience and fees.

Talk with the bankruptcy lawyer about the possibility and benefits of filing bankruptcy and what bankruptcy plans you have in mind. Yet keep open to the possibility that the attorney can suggest not going to bankruptcy court as the best solution.

Filing for bankruptcy to stop contact with a creditor

With a Chapter 7 bankruptcy filing, an automatic stay immediately goes into effect. The stay is a court order that stops all collections, including calls and letters, from the moment you file your case.

Yet bear in mind that according to bankruptcy laws, a creditor is not allowed to contact you directly or take any action to collect a debt once you get a case number. You will be assigned a case number when your bankruptcy petition is filed in bankruptcy court.

Proceedings will not always stop creditors

Some debtors mistakenly believe that simply informing the lender that a claim will be filed is enough to deter them from pursuing collection efforts.

Bankruptcy proceedings will not necessarily stop creditors from taking legal action against you. In some cases, your creditors may request that the court allow them to “lift the automatic stay.” If this happens, your creditors will be able to continue with any legal action that was already underway against you before you filed for bankruptcy.

Collection agencies will not care about bankruptcy protection until you get your case number and your creditor will probably continue to call you until they receive notice of your bankruptcy number.

The best method to notify your creditors you file bankruptcy

The Bankruptcy Court informs your creditors about your bankruptcy case once it is filed.  Bankruptcy cases are filed through an electronic filing system called ECF or pacer.  

This allows cases to be filed from anywhere at any time of day. The most common method for debt collectors to learn about bankruptcy filing is through a letter from the United States Bankruptcy Court Clerk.

The law requires that creditors on your bankruptcy schedules are notified of the filing. The B-9A is a type of letter in which all sorts of intricate information about the filing may be found.

What is a B-9A letter?

This letter includes:

  • Debtor’s name
  • Address
  • Social Security number
  • Client’s attorneys
  • Location and phone number of the office
  • Case number
  • Jurisdiction
  • Trustee
  • Date, time, and location of the Meeting of Creditors

A B-9A letter will be sent to all creditors listed on your bankruptcy schedules. The letter will provide information about the meeting of creditors, also known as the 341 Meeting.

All you have to do is wait for the notification from the court that your creditor has been receipt of the B-9A form.

In conclusion, remember that while an attorney can help you with your bankruptcy filing, the hiring of a law firm has no legal significance for creditors. The most important thing is that the court sends out notifications to all of your creditors about your bankruptcy case. Once they have received this notification, they are legally required to cease all collection efforts.


What To Do With Credit Cards Before Filing Bankruptcy Chapter 7

One of the good things about filing for Chapter 7 bankruptcy is that it eliminates your debts, which might include credit card charges.

If you’re considering filing for bankruptcy, it’s important to understand what will happen to your credit cards.

It’s time to stop using your credit cards once you’ve decided to file bankruptcy. The debts in your bankruptcy won’t necessarily be erased if you run up your credit card bills just before filing (and don’t even consider any luxury goods).

If you know you won’t be able to pay when you make the purchase, and yet you never planned to fulfill the obligation, a creditor might file an adversary proceeding, which is a lawsuit against you. 

This lawsuit in the bankruptcy case will assume that you used your credit card right before bankruptcy without ever having the intention of repaying the credit card.

How are credit cards treated in a typical Chapter 7 bankruptcy?

A Chapter 7 bankruptcy filing is assigned to a bankruptcy trustee, who is tasked with administering your case and deciding what will happen with your total debt and any unprotected assets.

If there are unprotected assets, then once the trustee reduces those assets to cash otherwise known as a liquidation, then the trustee will use those liquidated funds to pay creditors a proportion of what they’re owed.

Only the bankruptcy trustee pays out money to the credit card company and other unsecured creditors (whether it be one creditor or many).

Which payments are made first?

Secured claims, (e.g. mortgage or car loan) get paid first on any asset that is liquidated that the creditor has a valid security interest in.

Priority claims, such as outstanding tax obligations and back domestic support obligations, are then paid.

Nonpriority, unsecured debts such as credit card balances and medical expenditures are paid last.

When to stop using credit cards before filing Chapter 7


If feasible, everyone should stop using their cards entirely if they have money problems.  Owing money to either one single creditor or many creditors will not be solved using your card again and again. This works briefly but makes things worse in the long run.

Remember the use of a card is only healthy when you can pay it completely with a part of your total monthly income.

Is it time to file for bankruptcy?

If you feel like you’re sinking in quicksand, maybe it’s time to obtain a bankruptcy discharge.

Remember that once you file for bankruptcy, most credit card companies will thoroughly examine all of your purchases and other activity on the account.

Any debt you incur after you file bankruptcy will not be part of the bankruptcy and you will be required to repay it.

Will a credit card company discharge me during my Chapter 7 bankruptcy?

The goal of bankruptcy is to relieve individuals of personal responsibility for their financial obligations. 

The success rate for discharging unsecured debts such as your cards through Chapter 7 is an amazing 95.3% (you can read more about this HERE).

Important tip

All of your unsecured creditors must be treated equally under the Bankruptcy Code. You can’t make yourself favor one credit card firm by making a large payment before submitting your bankruptcy filing.

If you do, your bankruptcy trustee might reverse the payment and distribute the money among your creditors.

Cases when a bankruptcy petition cannot be filed

Not everyone is eligible for Chapter 7 bankruptcy. You are not qualified if you have filed for bankruptcy in the last eight years.

If you have been convicted of a federal felony or fraud in the last five years, you may not be eligible.

Finally, if your previous case was dismissed due to willful failure to comply with court orders, filing for bankruptcy may be ineffective.

Fraud and bankruptcy protection

Under bankruptcy law, any debt obtained by deceit, misrepresentation, or false promises is not dischargeable.

This includes charges or cash advances you didn’t intend to pay back when you used your card.

Because they must show that you had no intention to pay back the debt when you incurred it, companies like Visa or MasterCard may have a difficult time establishing fraud in bankruptcy court.

However, in certain cases, the card company has an easier time because the legislation presumes that your charges or cash advances were fraudulent if you used the credit card for non-essential items or luxury items within the 90 days preceding the bankruptcy case filing.

When will the bankruptcy code presume fraud and nondischargeable debts?

If you’re seeking debt relief that works, keep these two sorts of costs in mind and their probable worth. The figures apply to cases filed between April 1, 2022, and March 31, 2025.

ONE. Luxury items within 90 days of bankruptcy

If you charge more than $800 on a single credit card for luxury goods or services within the 90 days before filing your bankruptcy, those debts are presumed to be nondischargeable.

TWO. Cash advances within 70 days of bankruptcy 

If you make monthly cash advances of over $1,100 in total during the 70 days preceding your bankruptcy filing, those loans are assumed to be nondischargeable.

What to do when your credit card charges may not be erased

You can’t plan to erase any new debt without getting rid of the old one. Fortunately, there are other ways to get debt relief if your card companies are not discharged from bankruptcy.

The first one is to limit your credit card use and rely solely on cash for critical purchases. An obvious goal is that you need to forget about luxury goods.

If you have a few isolated debts that are not erased in bankruptcy, you may be able to pay these off over time without having to declare bankruptcy again.

The snowball method

Use the debt avalanche approach to pay off one credit card while making minimum payments on all other cards.

You may use your excess cash to begin paying:

  • Either the highest-interest-rate debt first
  • Or the debt with the smallest amount first

If you have excellent credit, you may transfer your outstanding balance to a new card with a lower interest rate. Some cards offer 0% annual percentage rates for a certain period and do not charge any balance transfer costs for the first few months. To obtain such a no-fee, low-rate card, you’ll need a decent score.

Debt management plans

You could also sign up for a management plan that includes the services of a credit counselor. Think about using professional help to learn specific information related to filing bankruptcy.

A counselor can assist you in several ways:

  • budgeting
  • developing a strategy
  • dealing with creditors

What to do if credit card debts keep growing?


When your card balance just seems to keep going against you, you might consider hiring a bankruptcy lawyer to see if they can help you file a bankruptcy case.

Bankruptcy filings can be done on your own, but going to a law firm and establishing a confidential attorney-client relationship might help you go back to sleep at night.

The premises of the attorney-client relationship

This relationship is different from a counseling service. In general, attorneys handle sensitive or confidential information daily.

An attorney’s ethical duty is to maintain a confidential relationship and not to disclose information without the client’s consent.

Your lawyer can give you objective advice about the pros and cons of bankruptcy. Since attorneys evaluate every case with knowledge of the law, they can tell you what type of bankruptcy might work best for your unique circumstances.

How to get a free evaluation by a bankruptcy attorney

Unfortunately, the internet isn’t necessarily secure to find out about the available services a law firm provides. Many websites are only interested in marketing purposes so they use pre-recorded messages or other automated technology for attorney advertising.

If you are thinking about filing for bankruptcy and erasing what you owe to your cards, we recommend you do a zip code search on Google and call the attorneys that are near you. It is better not to send text messages or emails.

Go and meet the attorneys in person and ask them for details on their services. Explain your case and ask for a free evaluation. Many attorneys will usually offer you a free initial consultation.

Be honest and tell them you need professional help. If you think they can handle your case, provide details of that which worries you.

Some attorneys can easily give you references for their services with other clients. You should check these references to make sure they are legitimate.

You can also ask the attorney for an estimate of how much their services might cost you. If you file with that attorney and he or she takes your case, provide them with information about the ways you will work with them.

Don’t let your credit card debt close the doors for you. Ask for help to file for bankruptcy!


Will a credit card company give me a new card after filing for bankruptcy?

Obtaining a new credit as soon as possible depends on the sort of bankruptcy you filed, as your bankruptcy must first be lifted. This might take anything from 6 months to 5 years.

What information can I give my bankruptcy attorney to help in my bankruptcy case?

Describe your situation in a few sentences. You may assist the bankruptcy attorney in evaluating your case by providing information regarding the kind of debts (like car loans, student loans for example), the estimated value of debts, and the important dates for your creditors.


When Should A Small Business File For Bankruptcy?

There are many factors to consider when deciding whether or not to file for bankruptcy as a small business. Some common reasons why businesses seek to file bankruptcy include:

  • To discharge debt that the business is unable to pay
  • To reorganize the business and its finances
  • To sell off assets to raise money to pay creditors

If your small business is struggling to make ends meet, it may be time to consider filing for bankruptcy. Bankruptcy can be a difficult decision, but it may be the best option for your business.

What happens to a small business filing for alternative bankruptcy?

Bankruptcy is a legal procedure undertaken by businesses with significant financial problems who cannot fulfill their immediate financial obligations.

When it comes to the bankruptcy code, the objective is usually to restructure debt so that a company may recover from its situation or sell off assets and pay back debts. However, not every scenario is the same, and the prospect of creditors, stockholders, and bondholders regaining their money are determined by a variety of circumstances.

What is a small business debtor?

A “small business debtor” is a person who is engaged in commercial or business activities and has aggregate noncontingent liquidated secured and unsecured debts of less than $2,000,000 as of the filing date for the petition or the order for relief. However, this debt limit may be increased in the near future by the U.S. Congress.

It may include any affiliate or joint debtor of such person who is also a debtor under this title, and a person whose primary business is the ownership of single asset real estate.

What happens when a small business goes to bankruptcy court?

A small business going to bankruptcy court means that the company is in danger of not being able to pay its creditors. In this case, the distressed company may ask the court to either discharge (wipe out) some of its debts or reorganize its debt so it can pay them back over time.

In most situations, a Chapter 7 business bankruptcy filing will terminate the company because no method exists to protect property belonging to a separate legal entity like a limited liability company (LLC). The trustee sells the firm’s assets, pays its creditors, and shuts it down.

On the other hand, sole proprietor small business owners can only file for Chapter 13 bankruptcy protection. As a result, if your firm is a partnership, corporation, or LLC, you will not be able to proceed with its Chapter 13 case.

Sole proprietors and business bankruptcy

You can include personal and business debt in your Chapter 13 bankruptcy if you are a sole proprietor business owner, just like in a Chapter 7 bankruptcy.

If you are a sole proprietor small business owner who has money, a Chapter 13 bankruptcy might be your best alternative. You might be able to keep the company operating while paying less on nonpriority unsecured personal and business obligations such as credit card bills, utility payments, and personal loans.

The small business reorganization act

The following are some of the features of small company bankruptcy:

  • shorter deadlines
  • a lot of flexibility to negotiate with other creditors
  • a private trustee to facilitate the bankruptcy process 

The bankruptcy case is facilitated because the debtor must file a reorganization plan for the distressed business with the court’s approval within 90 days of the filing date, and in this way, the trustee may help.

Even if the disgruntled creditors do not accept the plan, the court may still approve it under bankruptcy law.

The restructuring plan must ensure that all expected disposable income for three to five years is used to pay creditors and protect the creditors’ rights. It must be just and equitable to repay creditors equally.

The small business debtors must also submit a disclosure statement to the court that includes information on the scheme for the distressed company’s creditors to consider.

A liquidation analysis that estimates proceeds and cash flow that may be gained if the firm were liquidated must be included in the disclosure statement.

The struggling businesses must also submit some projections about their ability to make payments for the benefit of creditors as indicated in the small businesses’ reorganization plan.

Additionally, once the debtor’s scheme is confirmed, any debts that existed before the confirmation date are removed.

Which business bankruptcy is better: Chapter 7 or Chapter 11?

For a small business debtor, there are several possibilities for business bankruptcy.  The business may be reorganized under Chapter 11 Subchapter V (5), or it may be liquidated under Chapter 7.

Chapter 11 bankruptcy is a business reorganization plan, often used by large businesses to help them stay active while repaying every creditor separately with a repayment plan.  However, the U.S. Congress recently enacted the Chapter 11 Subchapter V (5) bankruptcy specifically for protection and access to bankruptcy for a small businesses.

Chapter 7 bankruptcy does not need a repayment strategy, but it does require you to sell or liquidate non-exempt assets to satisfy small businesses’ obligations for the benefit of creditors.

Non-bankruptcy alternatives for distressed small businesses

The Coronavirus Aid, Relief, and Economic Security Act (2020) allowed for direct help to American small businesses.

From March 27, 2021, the CARES act raised the debt limit from $2,725,625 to $7,500,000 for Subchapter V cases under the CARES Act. This only applies to qualifying and electing Subchapter V small businesses.

If you are a small business debtor who wants to benefit from this bankruptcy protection, it may be complicated to determine your eligibility. You should seek the counsel of a bankruptcy lawyer to see if you can file for bankruptcy protection.

Bankruptcy might not be your only option as a small business owner in financial distress. You may also consider:

  • Obtaining additional financing
  • Selling your business
  • Closing your business 
  • Negotiated creditor workouts
  • Dissolution or winding down of the business

Working with a law firm as a more efficient alternative

Suppose you are planning on taking advantage of the small business reorganization act and you want to dodge the worst-case scenario. In that case, it is advisable to work with a law firm that understands small business bankruptcy business reorganizations.

Privileges of the bankruptcy attorney-client relationship

A bankruptcy attorney understands perfectly well a bankruptcy process and the bankruptcy code. For them, showing up at the bankruptcy court under financial distress is every day.

If you are still having doubts, you must remember the attorney-client relationship is confidential, which means that the lawyer cannot be forced to testify against you in court.

The attorney can also help you choose the right type of bankruptcy for your business and give you an objective opinion about your case based on your historical financials.

Your lawyer will also be able to help you develop a reorganization plan and negotiate with your creditors. You can organize with them a workout plan to get more cash, how to get new capital, how to continue operating with a debtor, and how to benefit from any automatic stay.

Additionally, if you have any questions about the bankruptcy process for business owners, your lawyer will be able to answer them.


How To Qualify For Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is a type of bankruptcy that is used by individuals who have regular earnings. It allows people with consistent incomes to develop a debt repayment strategy.

What are the main characteristics of Chapter 13 bankruptcy?

In Chapter 13 bankruptcy, debtors may propose a payment plan that would require them to make payments to creditors over three to five years. 

If the debtor’s monthly income is greater than the relevant state median, the plan must be for five years. A plan may not provide for payments over a period longer than five years under any circumstances.  The payment plan will be paid generally through a wage order right from your paycheck.  If you do not have a paycheck, then it can be deducted once a month online through the Trustee’s payment portal or by a bank ACH.

Is Chapter 13 a good idea for my case?

In Chapter 13 bankruptcy, you can ask the court for a debt repayment plan if your unsecured debts are less than $465,275 and your secured debts are less than $1,395,875.

The purpose of a Chapter 13 repayment plan is to make your best effort to repay some or all of your debts over a three-year to five-year period.

Three Restrictions to Chapter 13 bankruptcy filings

  • You may not be eligible for the automatic stay a/k/a the bankruptcy protection, you have had a case dismissed within the last year of the most recent case filing.  In this situation, you will need to file a motion with the bankruptcy court to extend the automatic stay within 7 days after the initial case filing. 
  • You won’t be able to file bankruptcy if, in a prior bankruptcy case, the Judge restricted you through a court order from filing in the future.
  • Another restriction can be if you voluntarily dismissed your previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.  If you attempt to refile a case after the dismissal, the court will not grant you the bankruptcy protection against the creditor that obtained relief from the stay in the prior case. 
  • Unless an individual has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in a one-on-one or group session from an authorized credit counselor, he or she cannot be a debtor under Chapter 13 bankruptcy.

Why is a Chapter 13 bankruptcy filing a good idea?

Individuals who are unable to pay their mortgage installments may be eligible for Chapter 13 bankruptcy, which has several advantages over liquidation under Chapter 7.

  1. The most significant advantage of Chapter 13 bankruptcy is that it allows borrowers to save their houses from being foreclosed. Individuals can file under this chapter and stop foreclosure proceedings, as well as make late mortgage payments over time. They must, nevertheless, make all mortgage payments that are due during the Chapter 13 repayment plan on time.
  2. Another advantage of Chapter 13 is that it allows debtors to only make their best effort payments to the unsecured debts other than their mortgage for their primary home and extend them over the plan’s duration. Making these adjustments might result in lower payments.
  3. Chapter 13 also contains a special provision that protects third parties who are held liable for “consumer debts.” This protection may include co-signers.
  4. You can restructure vehicle loans to be repaid at a reasonable interest rate through the life of the bankruptcy plan.  This can assist you by saving your vehicle from repossession or reducing the monthly payment obligation.
  5. You can discharge and remove unsecured second and third liens on your residence.
  6. Finally, the individual makes plan payments to a Chapter 13 bankruptcy trustee who then distributes funds to creditors. While protected by Chapter 13, individuals will have no direct contact with secured and unsecured creditors.

Bankruptcy basics

Filing bankruptcy with the bankruptcy court

A case under Chapter 13 begins with the filing of a petition with the bankruptcy court that presides over the debtor’s area of residence.

The debtor must file with the court the following schedules and documents:

  1. Assets and liabilities
  2. Current expenditures
  3. Current income
  4. Executory contracts and unexpired leases
  5. A statement of financial affairs
  6. Certificate of credit counseling
  7. Chapter 13 repayment plan


This is just a small sample of the documents that may be required by the Bankruptcy Court. This list is not comprehensive and may not apply to every debtor.

The court has the option of dispensing with particular requirements if it believes them to be irrelevant or excessive in light of all relevant circumstances. A bankruptcy lawyer can help you put together your case easily since they are experts in debt relief options.

Couples who file Chapter 13

A married couple may file a joint petition or individual ones.

Regardless of whether the filing spouse is submitting a joint bankruptcy or separate individual bankruptcy, the non-filing spouse will be required to provide her income and tax information to the bankruptcy court. 

It is essential for the court, the trustee, and creditors to assess a household’s financial condition if only one spouse files.

A qualified bankruptcy lawyer can quantify how much money you have and whether your income exceeds the exceptions, as well as which way to file based on your situation.

Official bankruptcy forms

The official forms may be purchased at legal stationery stores. They can also be downloaded online from this website. The forms are not available from the court.

Information on your unsecured debts and secured debts


The debtor must make a record of all creditors and the amounts and kinds of their claims to file for Chapter 13 bankruptcy. All secured debts, as well as unsecured obligations, must be included. This means you have to include your credit card debt in your car payments and priority debts (i.e., child support, alimony, tax liability).

You must also provide detailed information on the source, amount, and frequency of your revenue, as well as a list of all of your assets.

The court must also be supplied with a thorough rundown of the debtor’s monthly living expenses, such as food, clothing, housing, utilities, medical bills, taxes, and transportation.  The Trustee can also require you to verify any and all of your listed income and expenses. 

Using an expert bankruptcy lawyer to represent you is a time-saver because he or she is an expert and knows exactly what to include in your schedule.

Court fees for Chapter 13 bankruptcy

A $313 filing fee payable to the bankruptcy court is required for all cases unless a special exception is granted by the Court for indigent debtors. The fees generally must be paid to the court clerk when you file, but the Court does allow it to be paid after case filing in multiple installments.  Your case may be dismissed if you do not pay the filing fee on the installment plan.

Important note on court fees  

Bankruptcy laws establish clearly that debtors should be aware that failure to pay these charges may result in their case being dismissed, no matter what their financial situation is.

The court-appointed trustee

When someone files for a Chapter 13 bankruptcy, an impartial trustee is appointed to oversee the case. In some districts, the U.S. trustee or bankruptcy administrator appoints a standing trustee who oversees all cases.

The trustee investigates the claim and acts as a disbursing agent, collecting payments from the debtor and sending funds to creditors.

Automatic stays

Once the petition is filed, it immediately stops most debt collection activity against the debtor or the debtor’s property. In certain circumstances, the stay may be only temporary. The stay takes effect automatically as a result of the operation of law, with no need for judicial intervention, unless you have had two bankruptcy cases dismissed in the last year preceding the filing of your third case.

Creditors may not start or continue lawsuits, wage garnishments, or even make phone calls demanding payments as long as the automatic stay is in effect.

All creditors whose names and addresses are provided by the debtor are notified of the bankruptcy case by the bankruptcy clerk.

Co-debtor automatic stay

There are also special automatic stay provisions to protect co-debtors in Chapter 13. A creditor may not seek to collect a “consumer debt” from someone legally responsible to the debtor unless the bankruptcy court permits it.

Hardship Discharge

Circumstances may arise later that prevents a debtor from following through on his or her plan. In such instances, the debtor or their bankruptcy attorney might ask the court for a hardship discharge.

In such circumstances, if the debtor’s failure to make plan payments is due to factors beyond his or her control rather than any fault on the part of the debtor, a hardship discharge is only available if it can be shown with reasonable particularity.

A hardship discharge can also occur if creditors have received at least as much as they would’ve in a Chapter 7 liquidation case, and modification of the plan is not an option.


What is a secured debt?

Home loans and automobile loans are examples of secured debt. The loan is secured by the vehicle or home, which means that if you don’t repay the debt, the creditor may repossess the car or seek foreclosure on the house.

What is an unsecured debt?

A credit card debt, a student loan, and personal loans are all examples of unsecured debt. If you default on your student loan, the government won’t seize your house because no property has been put up as collateral.

Can Chapter 13 bankruptcy stop foreclosure?

As soon as an individual files a Chapter 13 petition, the automatic stay prohibits the foreclosure procedure from continuing. The homeowner might still lose the property if the mortgage firm completes the foreclosure sale under state law before the debtor files a petition. 


Five Questions To Ask A Bankruptcy Attorney

If you are thinking about filing for bankruptcy in Michigan, you need to know a few things. Bankruptcy is a process that has certain requirements. It can also determine different situations in people’s lives.

Each person’s financial situation is unique, and the specifics might vary significantly.  Discharging or reorganizing your debts can provide relief, but it’s important to understand what this process entails.

Your bankruptcy attorney should be able to provide you with an honest opinion of whether filing for bankruptcy is the best solution to your financial problems. A good law firm will never propose it if it isn’t appropriate for you.

In the United States, who is in command of bankruptcy laws?

The US Constitution gives the US Congress the power to make laws about bankruptcy for the whole country.

Legislators have passed several laws about bankruptcy. The most recent law is The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). This law governs how bankruptcy works in our country.  Additionally, each state has the right to make its laws as it relates to the state-allowed exemptions you are entitled to in bankruptcy.

And across the country?

There are 90 districts for bankruptcies across the country. The bankruptcy courts have their own offices which clerks run.

The United States bankruptcy judge is the court official with decision-making authority in federal cases, which are heard in the United States Bankruptcy court.

Five questions for your initial consultation with a bankruptcy lawyer

First of all, remember that most law firms offer a free consultation before you hire them for a bankruptcy case.

A free consultation helps you decide before hiring a bankruptcy lawyer because you can ask some important questions that can make all the difference for your entire process before showing up at the bankruptcy court.

Question #1 Do you recommend filing bankruptcy in my case?

While the circumstances may appear comparable, each person’s circumstance is unique. Any bankruptcy lawyer must be able, according to his or her experience, to give you an honest assessment as to whether you should file for personal bankruptcy.  This assessment can be very accurate so long as you, the client, are providing accurate information regarding your entire financial/asset situation.

Question #2 How do I prevent my bankruptcy case from being dismissed?

Bankruptcy cases can be dismissed for a variety of causes, including fraudulent conduct (such as embezzlement) and the failure to submit the necessary documentation to the court.

When you submit your papers, you must tell the truth and provide complete financial information. This includes any investment or real estate holdings, as well as other income sources and assets.

If you make a fraudulent statement on your paperwork or otherwise try to defraud the system, the court will most likely reject your application and issue a denial of discharge. You may also be prosecuted by the department of justice for committing a crime.

In most cases, to qualify for bankruptcy, your disposable income must be lower than the state average based on your family size. This is called the means test. The test compares your yearly income for the six months beforehand against that of a typical family in the state.

All debtors are required to complete a credit counseling course before bringing a claim and a debt management course before obtaining a discharge, according to the law.

When you complete each course, you’ll get a certificate of completion to submit to the court. If neither certificate is submitted, your case will be dismissed or you may not receive your discharge in bankruptcy.

Question #3 Which type of bankruptcy is the best for my case?

A bankruptcy lawyer can’t respond to this without first considering your property and debt types. You’ll also need to explain how much money you make.

Chapter 7 bankruptcy 

Chapter 7 bankruptcy can help people who do not have a lot of money and who can protect their property with bankruptcy exemptions after considering the non-exempt assets.

One of the benefits of Chapter 7 is that it is over in about four months. However, any property that is not covered by a bankruptcy exemption will be sold to pay off your creditors according to the bankruptcy code.

Chapter 13 bankruptcy 

Individuals with a steady income who can pay creditors over a three- to five-year repayment plan are eligible for Chapter 13.

It’s a fantastic tool for debt relief and reorganizing, as it can help individuals catch up on their mortgage and vehicle payments. You may keep all of your property in Chapter 13 as long as you can repay creditors the amount of money owed on the exempt property through the plan.

According to the bankruptcy code, the average duration of a Chapter 7 bankruptcy is three months, whereas Chapter 13 bankruptcy usually lasts three to five years because it is a debt repayment program.

Means test

The main objective of the means test is to force higher-earning debtors to repay part or all of their debt through Chapter 13 rather than allowing them to do so through Chapter 7.

All property that a Chapter 7 filer can’t protect with an available exemption may have that property sold by the Chapter 7 Trustee to use those sale funds to repay the bankruptcy creditors you listed in your case. . Most filers who have a choice choose Chapter 7 unless they own an important non-exempt property they want to keep.

Question #4 What is the real cost of bankruptcy (and are there additional costs)?

If you are going through this process, the costs include:

  • credit counseling course fees
  • court filing fees
  • bankruptcy attorney fees (unless you file on your own)

Filing fees are the same throughout the country, but attorney charges vary depending on where you live, the complexity of your case, and the attorney.

Unless your attorney’s fees fall below the so-called “no-look” level that is recognized as reasonable, your court will evaluate them in Chapter 13 bankruptcy. The level of legal fees varies from one district to another, so check with your local court before hiring an attorney.

You should feel confident that one attorney is never your only option. Do not be afraid of paying higher fees to your lawyer when filing for bankruptcy if that will give you peace of mind.

Question #5 Will I be able to eliminate all of my debts?

A bankruptcy attorney will be able to tell you if you can discharge or get rid of credit card obligations, medical and utility bills, personal loans, back rent, and other debts.

In other situations, debt relief may include getting rid of your mortgage and automobile payment, but you must return the property to the creditors if you don’t fulfill your obligations as agreed.

Although you may not be able to eliminate other debts, such as child support obligations or educational loans in most cases, and tax debt incurred recently, you might still be able to negotiate a settlement.

Expect your lawyer to inquire if you have any non-dischargeable obligations. You can get a head start by checking out this list of debts that you cannot discharge.

Finding an experienced bankruptcy lawyer

If you are thinking about going through a bankruptcy process, though you can do it on your own, it is advisable to look for a law firm that is practicing bankruptcy law.

Screening prospective bankruptcy lawyers is the first stage in choosing one. You need to interview a few bankruptcy attorneys to find the right one for you. Make sure you find someone who you feel comfortable with and who understands what you’re going through.

Alternative options to finding a bankruptcy attorney

Most law firms also have their contact at your local bar associations, but it is not the only one.

Websites that can assist you in locating bankruptcy lawyers abound on the internet, but traditional approaches are still beneficial. Inquire with neighbors, as well as friends and relatives.

Some websites that can help you find a good attorney to file for bankruptcy are:


How long does it take to file bankruptcy in Michigan?

The time it takes to complete a case is usually 4-5 months, but, once the case is filed, the court’s protection is immediate. This implies that creditors will not contact you again, send you letters, seek money from you through collections, or file legal actions such as wage garnishment.

What are the consequences of filing bankruptcy?

Bankruptcy may have a negative influence on your immediate monetary situation. After bankruptcy, obtaining credit might result in higher interest rates. Obtaining credit after filing for bankruptcy may necessitate security deposits.

Should I close my bank account before declaring bankruptcy?

It depends on the type of account held, (i.e., through a credit union or a traditional bank) and whether you still owe money to the banking institution.  You’ll need to open checking and savings accounts with a bank that doesn’t deal with any of your debts to file bankruptcy. You don’t have to terminate other accounts. leave them open and report them or have your lawyer do it.


Will Filing Bankruptcy Stop Wage Garnishment?

Filing bankruptcy stops most wage garnishment and also prevents creditors from obtaining new garnishment orders against you. When you file bankruptcy, an “automatic stay” is issued automatically.

Wage garnishment enables creditors to take money from your paychecks when you stop making payments to them. Every state, including Michigan, has a prescribed legal method for seizing wages that debtors must follow.

What is wage garnishment in Michigan?

A wage garnishment is a legal procedure in which your employer is required by court order to withhold your earnings to pay a debt, such as child support.

If you don’t pay your debts, the people you owe money to may take up to 25% of your paycheck to recoup what you owe. This is called wage garnishment.

Wage garnishments do not include situations in which employees consented to their employers turning over a portion of their earnings to creditors as part of an agreement.

A creditor in Michigan can take whatever is left of your salary after all debts are paid. This might mean up to 25% of your disposable earnings or the number of your disposable earnings that is more than 30 times the federal minimum wage ($217.50 in a 2021 figure).

Will Chapter 7 bankruptcy stop the garnishment?

If you have your wages garnished, filing for Chapter 7 bankruptcy will generally prevent the garnishment (also known as wage attachment) from continuing.

Because of the automatic stay, most creditors are unable to continue with collection procedures during your bankruptcy case.

What is an automatic stay?

The automatic stay is a provision in the U.S. Bankruptcy Code that prevents creditors, collection agencies, and even some government departments from attempting to collect debts while your bankruptcy case is ongoing.

The major goal of an automatic stay is to provide you with some time and breathing room while the trustee oversees your case and examines your bankruptcy petition.

Chapter 7 and Chapter 13 bankruptcy with the automatic stay

The automatic stay is triggered when filing for bankruptcy, either Chapter 7 or Chapter 13 bankruptcy.

The automatic stay forbids most creditors from continuing with collection activities, which can be beneficial to both debtors and their lawyers (who may charge less than usual fees), as well as allowing debtors the opportunity to regroup during bankruptcy.

There is also a special automatic stay provision in Chapter 13 bankruptcy that protects co-debtors, such as co-signers on loans, from collection efforts.

Exceptions to the automatic stay

There are a few exceptions to the automatic stay and generally include cases of child support, student loans, and taxes. A creditor cannot take your next paycheck without first filing a lawsuit against you, winning the case, and obtaining a court injunction.

Domestic assistance obligations are not wiped out (discharged) in bankruptcy, so the creditor may not stop a garnishment while the case is pending, and most bankruptcy courts will not demand it.


Should you hire a law firm if they are garnishing your wages?

A creditor may seize a portion of your pay as part of wage garnishment to reimburse obligations you owe.

If you have debts that have been reduced to a judgment or taken by administrative orders, your wages may be garnished to pay them back. This includes child support, spousal support, back taxes, and student loans.

Whether you should hire an attorney or handle the garnishment some other way is determined by a variety of things, such as whether you don’t owe the debt or the legal costs will exceed the amount of your debt.

If you are dealing with an unsecured debt, it’s possible that having a lawyer issue a free evaluation for your case will be beneficial at times. Sometimes, if the creditor is taking too much or if you want to work out other payment alternatives with your lender, obtaining a legal opinion can assist.

If your employer is threatening to fire you because of the garnishment or if the creditor is attempting to get around the wage exemption by seizing a bank account, an alternative is for attorneys to evaluate your case and might give you alternatives.

Bankruptcy as an alternative to stopping wage garnishments

It’s important to note that while bankruptcy stops most wage garnishments, it does not cancel them entirely.

If you’re being wage garnished, you may be wondering if you can avoid it. In certain circumstances, doing nothing and allowing your wages to be garnished until the debt is paid is the wisest path forward.

It is critical to remember that a garnishment can be challenged at any time, regardless of whether the debt was incurred in good faith or not. However, it may be prudent to contest the garnishment (or amount) on your own, negotiate with the creditor, or hire a bankruptcy attorney at other times.

Let attorneys evaluate your case (in most cases they will do it for free!)

A bankruptcy attorney-client relationship is a confidential relationship that will put in the hands of your lawyer what actions should be taken with all your creditors. You can let your bankruptcy lawyer talk to government entities, as well as whoever is about to garnish your wages.

If it is a good idea to do a bankruptcy filing, after a free bankruptcy evaluation, most lawyers will give you their opinion and the pros and cons of a person who can file for bankruptcy (if that is you).

Remember all sensitive or confidential information is safe and necessarily secure in your attorney’s hands in case of a bankruptcy case to stop wage garnishment.

Can I have multiple bankruptcy filings and stop a garnishment order?


Yes, you can. Even if you don’t get a discharge, a second bankruptcy filing may be useful. You may not need a discharge depending on the situation. Sometimes you need just more time to pay off your debt.

Imagine you owed federal taxes that you couldn’t pay off in bankruptcy, and you couldn’t come up with a fair repayment plan. To avoid wage garnishment, you may file for Chapter 13 bankruptcy and stretch out the payments over a five-year Chapter 13 bankruptcy payment plan.

If you are thinking about filing for bankruptcy for a second or third time thinking that bankruptcy stops wage garnishment under the federal law, it is recommended to seek the help of a lawyer that can advise you on the benefits of another bankruptcy filing.

What happens to a domestic support obligation during bankruptcy?

A domestic support obligation is any debt incurred by a spouse, former spouse, child, or government entity before or after a bankruptcy filing that is owed to or recoverable by a spouse, former spouse, child, or governmental unit in the form of alimony, maintenance, or support.

The terms of a divorce decree, separation agreement, property settlement agreement, court order, or administrative decision are all valid sources for these obligations.

Section 523(a)(5) of the bankruptcy code exempts domestic support obligations from discharge, regardless of whether the case is filed under Chapter 7 or 13. Even after the bankruptcy case is finished, child or ex-spouse support obligations continue to exist.



I received my bankruptcy case number today. Does that stop a wage garnishment immediately?

The automatic stay is automatically effective once the bankruptcy case is filed, and it demands that all collection calls, lawsuits, and wage garnishments stop immediately. The bankruptcy court may impose severe fines and penalties on creditors who continue to collect after the entry of an automatic stay.  However, you may not get the full benefit of the automatic stay on a second or third bankruptcy filing. 

What are the most wages that can be garnished?

The law limits the amount that a judgment creditor may collect from your wages if it is garnishing them. The percentage of your disposable income that can be taken is limited to 25% of your total income, or the dollar amount that your income exceeds 30 times the federal minimum wage, whichever is smaller.  However, governmental units may be entitled to an even higher garnishment amount.

Can my bank account be garnished without notice in Michigan?

A creditor can use garnishment to collect money from a garnishee. In Michigan, money may be taken from salary and other incomes, as well as bank and credit union accounts.  The only notice you will receive is the notice from the Court that a creditor has filed a writ and request for garnishment.  If uncontested, then the garnishment can happen after that at anytime and without further notice.

What assets are protected from garnishment in Michigan?

Money cannot be garnished if it comes from Social Security benefits and disability payments, Military Annuities and Survivors’ Benefits, Compensation for Injury, Death, or Detention of Employees of U.S. Contractors Outside the U.S., State Disability Assistance, Individual Retirement Accounts (IRAs), income benefits under the Michigan Civil Service Act and the Michigan Retirement Act, and ERISA pensions, among other places.  However, beware that once that money goes into your bank account, it still may be garnished by a creditor and you will now need to begin dealing with the creditor to have them return those funds after you prove the funds garnished were actually protected funds.


After Bankruptcy, Are Mortgage Loans Possible?

It is feasible to get a home loan after bankruptcy. However, the length of time you must wait after your bankruptcy is dismissed or discharged depends on the type of bankruptcy and the loan you took.

FICO says that bankruptcy can damage your credit scores by anywhere from 130 to 240 points, depending on the circumstances. Lenders are often happy about helping borrowers re-establish themselves through several processes, like refinance, after bankruptcy.

If you want to buy a house after going through bankruptcy, it’s vital to understand how the bankruptcy process affects your chances of obtaining a home loan as well as which mortgage companies and loan amounts are open to you.

Mortgage options after bankruptcy

After bankruptcy, obtaining a new mortgage might be difficult, but it isn’t impossible. Many lenders require set criteria for people who have emerged from bankruptcy, completed a waiting period, and fulfilled other eligibility requirements.

Higher interest rates and a costlier mortgage are possible after bankruptcy. Improving your credit score can help offset this.

The right lender will give you a lot of payment options and will talk about the different mortgage programs so you feel safe about asking for a mortgage. If you’re considering getting a mortgage after bankruptcy, read through this article to learn more about a mortgage after bankruptcy.

When you file for Chapter 7 bankruptcy and go to bankruptcy court and receive your discharge, then all of your old unsecured debts are discharged or what may be referred to as canceled, allowing you the financial ability to pay off any new obligations.

Before taking on any new debt, it’s important to keep in mind your financial situation and make sure your monthly income is enough. Not all creditors will be as prompt to offer a loan, particularly if the amount is significant, and the interest rate might go up.

Prepare a written explanation of your financial issues and what you’ve done to avoid such problems in the future when seeking potential lenders. Prepare two years of tax returns, recent paycheck stubs, banking account information, bankruptcy discharge papers, a list of liquid assets, and a written description of your financial difficulties and what you have done to correct them.


Waiting periods for government-backed loans after a recent bankruptcy

Each loan type has its own guidelines for how long you must wait after a bankruptcy. Remember these will not count as a conventional mortgage. You have to wait for an appropriate waiting period.

To qualify for a waiting period, some loans require the borrower to prove that they had a one-time event that caused them to lose income and that it was something outside of their control.

Furthermore, the candidate must demonstrate re-established credit, which means no major negative items on his or her record since the bankruptcy.

If you default on a government-backed loan, you may be added to the CAIVRS (Credit Alert Verification Reporting System) database. The CAIVRS issue must be addressed to obtain another government-backed loan.

Fortunately, you may appeal the status of your CAIVRS findings once you have received them. Many people who are in the system do qualify to be removed.

It might take some time to appeal your CAIVRS denial. If you have any questions regarding your status. Bankruptcy attorneys can help their clients clear questions up before beginning house shopping. It’s always a good idea to get a mortgage pre-approval before looking for houses, regardless of the circumstances.

FHA loans after bankruptcy

The borrower must wait a minimum of two years after Chapter 7 bankruptcy before they can get a loan from the Federal Housing Administration (FHA). Borrowers may also have a longer waiting period, depending on what the mortgage lenders require.

Under FHA rules, a complete explanation must be supplied with the application for an FHA home loan. After Chapter 7, borrowers must financially qualify, show a track record of good credit history in the wake of the filing and fulfill other FHA requirements to obtain a new FHA-insured mortgage loan.

If you have been discharged from a Chapter 7 bankruptcy in the last two years, other lenders may be willing to work with you. However, it is important to note that the waiting period begins from your discharge date, not the time it is filed.

FHA rules permit a mortgage lender to consider an FHA loan application from a borrower who is still making payments in Chapter 13 bankruptcy only if the mortgage payment has been verified for at least one year. The written permission of the court trustee is also a necessary condition of the policy for mortgage approval.

To get home loans, borrowers must write a letter explaining the bankruptcy and submit it with the loan application. Borrowers must have a minimum credit score, a good job history, and other financial qualifications that might differ from those of a conventional loan.

VA loans after bankruptcy

After two years, lenders typically wait another two years before accepting you for a Chapter 7 bankruptcy. With a Chapter 13 filing, you may be eligible for a VA loan just 12 months after the date of filing.

It can take up to 10 years for a person’s credit score to recover after something bad happens. If your credit score is low, you might have to work hard to fix it.

The good news is that for VA borrowers, you will need a lower credit report than what you’ll need for conventional or even FHA financing.

USDA mortgage loan after bankruptcy

In most cases, the USDA loan bankruptcy waiting period following Chapter 7 bankruptcy is three years.

If you want to keep your homeownership, a Chapter 13 bankruptcy may be an option for you. This implies that instead of having to sell off your assets, you can submit a payment plan that will allow you to repay debts over three to five years.

Fannie Mae and Freddie Mac mortgages after bankruptcy


After the bankruptcy, Fannie/Freddie loans demand a four-year waiting period; however, under exceptional circumstances, these lenders will approve mortgages on a case-by-case basis after two years.

Fannie Mae requires a four-year waiting period following a Chapter 7 bankruptcy action’s discharge or dismissal date. If mitigating circumstances can reasonably be confirmed, it will allow for a two-year delay.

Remember it is important to keep up to date with the latest mortgage news because debt relief programs, waiting periods, credit scores, interest rates, and mortgage application rules might change from one day to the next.

Bankruptcy might help you get rid of a second mortgage

Many people have a second mortgage on their property. In several of these situations, the loans were not taken because the borrower was experiencing financial problems.

What happens to a second mortgage after bankruptcy?

Second mortgages can be used to assist someone in financial distress, but they are also an investment instrument that allows you to borrow against the equity in your house.

Is bankruptcy a good option to get rid of a mortgage?

Sometimes a family purchased a house that they could afford, took out another mortgage, and discovered that they were unable to pay their monthly obligations. In these situations, bankruptcy may be the best solution when dealing with foreclosure concerns that include another mortgage.

Many bankruptcy attorneys have assisted homeowners in eliminating this other mortgage and halting foreclosure proceedings on their house by utilizing a bankruptcy provision that allows them to do so.

Is bankruptcy a way to get rid of my mortgage debt?

There are different types of bankruptcy, and depending on which one you qualify for, some or all of your debts may be forgiven. However, most homeowners don’t file for Chapter 7 bankruptcy because they want to keep their homes.

However, it is possible to use bankruptcy to get rid of the next mortgage when you file for Chapter 13 bankruptcy. This is different from getting rid of your first mortgage.

When a person has no equity in their home, another mortgage is considered unsecured debt. It is considered unsecured since the value of the home does not equal or surpass the amount owed to the first mortgage company.  In this instance, a Chapter 13 case via an adversary proceeding can effectively remove the second mortgage obligation if you complete the chapter 13 case.

The good news is that bankruptcy can help you restructure your obligations and free up cash to pay off outstanding bills. For people who are underwater, meaning they owe more in mortgage debt than their home is worth, bankruptcy may be an especially beneficial tool.

When their Chapter 13 payment plan is completed, the other mortgage will be canceled, and they’ll have the option of restarting their lives in a house with a mortgage that better reflects the property’s value.