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Friday, October 16, 2015

How Do I File Bankruptcy?

If you're facing overwhelming debt, garnishment, foreclosure, or other aggressive creditor collection activity, filing Chapter 7 or Chapter 13 bankruptcy may be the best solution for you. To determine whether you should file bankruptcy, your first step should be to consult with an experienced bankruptcy attorney.

Consulting with a Bankruptcy Attorney

By consulting with an experienced bankruptcy attorney, you should be able to determine what your options are and what solution makes the most sense for you. I offer free in-person consultations. So, there is no harm to sit down with me and discuss your situation. When I consult with potential clients, I review their situation in detail, examining their finances, assets, debt obligations, and personal goals. This information allows me to not only explain a person's options, but also the best way to resolve their problems while moving toward their personal goals, such as saving a home or car, or rebuilding their credit.

Researching Bankruptcy

I always appreciate it when I speak with a potential client that has taken the time to do a little research about what bankruptcy entails. There are some very good bankruptcy information sources on the internet; however, there is also a lot misinformation. When researching bankruptcy, a person should always use great caution when basing a decision on what they read on the internet. Getting the opinion of an experienced bankruptcy attorney that practices in your area is always the best option for getting the right information. If your looking to get some basics and you live in the Western District of Michigan, the Bankruptcy Court's website is a good place to start: U.S. Bankruptcy Court - Western District of Michigan 

How to Choose an Attorney

Attorneys can vary greatly in experience, manner, and cost. While I think paying a fair price to file bankruptcy is extremely important, I think it is equally, if not more important, to find an attorney that you feel comfortable with and that has the experience to effectively represent you. When you consult with an attorney, don't be afraid to ask what their experience is. Also, don't be shy asking the attorney to explain how bankruptcy works. While bankruptcy law is very technical and confusing, a good attorney should be able to translate the complex concepts and legalese in a way a layperson can understand.

Documents Needed to File Bankruptcy

When you prepare a bankruptcy, Chapter 7 or Chapter 13, there are certain documents that must be provided to your attorney so that the filing can be correctly prepared. There are also documents that must be provided to the trustee that is assigned to your case. If you are going to file bankruptcy, you should expect to have to provide the following: (1) copies of your most recent city, state and federal tax returns, (2) proof of your household income, (3) bank statements, (4) vehicle titles, (5) real estate documents (i.e. recorded deed & mortgage, mortgage statement(s) state equalized statement, proof of homeowners insurance, etc.), (6) statement demonstrating the type and value of all investments, (7) statement relating to insurance policies, (8) judgments of divorce, and (9) copies of statements/bills demonstrating the debts owed.  This list is by no means complete. When you consult with an attorney they should be able to tell you exactly what is needed.

The Bottom Line

If you think you need to file bankruptcy, make sure to consult with an experienced local bankruptcy attorney. I have helped thousands of individuals through their difficult financial times. I offer free consultations and will take the time to understand your situation and help you determine what solution is best for you. Please call me at (616) 389-0629 or visit my website at www.ryanbeachlaw.com.

This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Friday, August 21, 2015

Repossession: Prevention and Recovery of Repossessed Cars

Whether your car is about to be repossessed or has already been repossessed, filing bankruptcy can help you save your car.

Upon filing a bankruptcy, an automatic stay takes effect, unless the person filing has had two more active bankruptcies in the last year. The automatic stay is essentially a federal court order that tells creditors that they cannot take any action to collect on a debt, such as phone calls, collection letters, lawsuits, garnishments, seizure, foreclosure, and repossession. The automatic stay also allows for recovery of "property of the estate", which includes a repossessed vehicle that can still be redeemed by law.

Pending Repossession

If your car is about to be repossessed, the automatic stay would prevent the auto creditor from taking your car. However, the relief provided by the automatic stay varies by the type of bankruptcy being filed. Chapter 7 would most likely provide protection that lasts 1-3 months, whereas Chapter 13 would provide protection for 3-5 years as long as the terms of the confirmed plan are being followed and the car is insured as required [see below for more information on how auto loans are treated in Chapter 13]. As such, Chapter 7 may not be the best option for saving a car if a person does not have the funds available to cure the default in payments or the ability to redeem the vehicle through the bankruptcy process.

Post Repossession 

If your car has already been repossessed, it is possible to force the auto loan creditor to return the vehicle and accept reasonable repayment terms through a Chapter 13 plan. However, once the vehicle has been  repossessed, action should be taken right away to recover the vehicle. Under Michigan law, an auto lender must allow a person 15 days to redeem the vehicle before they can try and sell the vehicle at an auction. In other words, if a person wants to save their car, they must file a Chapter 13 prior to the 15-day redemption period expiring. Once the car is auctioned it is too late.

Treating Auto Loans in Chapter 13

Chapter 13 allows an individual to prevent repossession and recover vehicles that have already been repossessed but not yet auctioned. Chapter 13 allows an individual to modify an auto loan in several ways. If a vehicle was purchased over 910 days prior to the date the Chapter 13 is filed, the auto loan can be modified as follows: (1) lower the total amount to be repaid in full as a secured claim to the market value of the car; (2) lower the interest rate to approximately 5%; and (3) extend the term of the repayment of the auto loan up to 5 years. If the vehicle was purchased within 910 days of the filing date of the Chapter 13, the auto loan can be modified as follows:  (1) lower the interest rate to approximately 5%; and (2) extend the term of the repayment of the auto loan up to 5 years. In most cases, Chapter 13 allows an individual to significantly lower an auto loan payment.

Treating Auto Loan Deficiency Debt

If your car has been repossessed and auctioned or you do not want to save the car, it is possible to get relief from the auto loan deficiency debt (difference between what is owed and the amount the car is sold for at auction). Auto loan deficiency debt is considered general unsecured debt. As such, it can be discharged by filing Chapter 7 or Chapter 13 bankruptcy. Chapter 7 would allow an individual to discharge the total amount owed with no repayment. Chapter 13 would allow an individual to discharge the total amount owed by paying a percentage or fraction of what is owed (typically 10% or less is paid through a Chapter 13 plan and the other unpaid percentage is discharged).

The Bottom Line

Most bankruptcy attorneys offer free consultations. If your car is about to repossessed or has already been repossessed, take advantage of a free consultation. By consulting with a knowledgeable bankruptcy attorney, you can find out what your options are and get help deciding what option makes the most sense for you.

Visit Law Offices of Ryan F. Beach

This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Thursday, June 25, 2015

What Does a Discharge Really Do?

An attorney should be able to explain to a client or potential client how bankruptcy works and what certain legal terms mean. Bankruptcy can be complicated and hard to understand, even for an attorney. So, it is not unusual that certain terms or concepts are simplified so that a person can have a better understanding of what going through bankruptcy means for them.

A discharge is one of the main purposes or goals of filing a bankruptcy. So, discharge is a word that bankruptcy attorneys use constantly and is a term that is often oversimplified. As a result, many debtors or potential debtors believe that a discharge extinguishes a creditor's claim. While a discharge does extinguish a creditor's claim to some extent, it is not accurate to say that the creditor's claim is extinguished. When a debtor receives a discharge, their personal liability for debt is being extinguished (assuming the debt is dischargeable). That means that the creditor's claim may survive in some form and may be enforceable in some way other than collecting against the debtor personally.

Secured Debt

When a person receives a discharge they are extinguishing their personal liability for debt. It is important to understand what happens when debt is secured by property, such as a home or car. If a person continues to make payments on secured debt either according to the applicable contractual terms or through a Chapter 13 plan, there is rarely any issue with keeping the property. However, if payments cease, necessary reaffirmation agreements are not signed, and/or the property is declared surrendered, the creditor can collect against the property that secures their claim. For example, when a debtor files Chapter 7 they discharge their liability on a home mortgage (unless a reaffirmation agreement is executed).  Discharging the debtor's personal liability on a home mortgage does not mean the mortgage company can't collect against the home that secures their claim. So, if a debtor is surrendering a home through the bankruptcy or they fail to pay the home mortgage and the debt is not reaffirmed, the mortgage company can't collect against the debtor personally, but they can foreclose on the property.  In other words, the debtor's personal liability is extinguished, but the creditor's claim still exists and can be enforced against the home itself.

Joint Debt - Codebtors/Cosigners

Understanding what a discharge does is also very important when there is codebtor or cosigner on a debt. Again, when a person receives a discharge they are extinguishing their personal liability for debt (assuming the debt is dischargeable). If someone else is liable for a debt, that person will remain liable after the debtor receives their discharge. For example, a father cosigns on an auto loan for his son. The son files Chapter 7 and surrenders the auto. Upon receiving a discharge, the son will no longer be personally liable for the auto loan. However, the father will remain liable on the entire balanced owed. The creditor can collect on their claim by repossessing the vehicle and collecting personally against the father for any unpaid balance.

The Bottom Line

An individual can obtain a discharge by filing Chapter 7 or Chapter 13 bankruptcy. Some debts are non-dischargeable in Chapter 7 and Chapter 13. Some debts are non-dischargeable only in Chapter 7.
Most bankruptcy attorneys, myself included, offer free consultations. By consulting with an experienced bankruptcy attorney, you can determine what your options are, how Chapter 7 or Chapter 13 can help you, and what obtaining a discharge would mean for you. A bankruptcy discharge can provide incredible relief. Make sure you understand your options so that you can choose the right course of action.

Visit Law Offices of Ryan F. Beach

This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Friday, May 29, 2015

Can I Eliminate Medical Bills in Bankruptcy?

Medical debt is considered general unsecured debt and is dischargeable in a Chapter 7 or Chapter 13 bankruptcy. How you discharge or eliminate that debt is determined by what type of bankruptcy you file.

Chapter 7 

As long as you are eligible for Chapter 7, the discharge will eliminate your personal liability for your medical bills, regardless of the amount owed. In other words, there is no limit to how much medical debt you can get rid of by filing Chapter 7.

Chapter 13

Chapter 13 bankruptcy will also eliminate your personal liability for your medical bills; however, there are debt limits in Chapter 13.  Currently, the unsecured debt limit in Chapter 13 is $383,175.00. If you exceed the unsecured debt limit, you are not eligible for Chapter 13.

In Chapter 13, medical bills are put into a creditor class referred to as general unsecured debt, which would also include such debts as credit cards and unsecured loans.  These types of debts are generally paid back at a fraction or percentage of what is owed. The unpaid fraction or percentage is eliminated or discharged upon plan completion and entry of a discharge order. The amount that much be repaid to general unsecured creditors depends on several factors, such as your income, budget and unexempt equity in personal or real property that you own.

The Bottom Line

Medical debt can be eliminated or discharged by filing bankruptcy. If you are struggling with medical debt or other debts, consult with a bankruptcy attorney to determine what type of bankruptcy makes sense for you and how your debts would be treated. I, like most bankruptcy attorneys, offer free consultations. So, take advantage and make sure you avoid garnishment and other nasty collection actions.

Visit Law Offices of Ryan F. Beach

This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Thursday, April 9, 2015

Discharging Divorce Obligations

Divorce is one of the leading causes of debt accumulation. As such, divorce often leads to filing bankruptcy. Conversely, financial problems often cause or exacerbate marital problems which ultimately lead to divorce. This cause and effect relationship between bankruptcy and divorce makes for an unusually interrelated relationship. 

In my experience, consulting with a bankruptcy attorney before filing for divorce typically makes the bankruptcy and divorce less complicated and more cost effective. I am not saying that it's always best to file bankruptcy prior to filing for divorce.  The timing and order of the legal proceedings depend on many factors and should always be discussed with the attorneys involved. However, by filing bankruptcy jointly and receiving a discharge before filing for divorce, it may be possible to avoid spending significant time and arguments on debt allocation and miscellaneous support issues. The more time a divorce attorney spends on a case, the higher the attorney fees.  The fewer the arguments the better. 

In most cases, a person files for bankruptcy after they get divorced. This may be because the judgment of divorce created new overwhelming debt obligations, attorney fees were paid at the expense of other existing debt obligations, or the change in household income and expenses makes it so that a person can no longer meet their debt obligations. So, the question is often what impact does the bankruptcy have on the divorce obligations such as domestic support, property settlement and other marital dissolution obligations.

Exceptions to Discharge

Section 523 of the Bankruptcy Code provides a list of debts that are not subject to a bankruptcy discharge.  All of the §523 exceptions to discharge apply in a Chapter 7.  Most, but not all, of the §523 exceptions to discharge apply in a Chapter 13. Understanding what is dischargeable in a Chapter 7 and what is dischargeable in a Chapter 13 is crucial for deciding what type of bankruptcy makes the most sense. 


There are two specific Bankruptcy Code provisions that apply to divorce related debt and its dischargeability.  Under §523(a)(5) debt for a domestic support obligation is non-dischargeable.  Under §523(a)(15) debt that is incurred "in the course of a divorce or separation or in connection with a separation agreement, divorcement decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit" is also non-dischargeable. To keep things simple, I like to refer to the debt described in §523(a)(15) as "marital dissolution obligations."

Discharge of Domestic Support Obligations

The non-dischargeability of domestic support obligations is fairly straightforward. Section 523(a)(5) states, "(a) [a] discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual from any debt (5) for a domestic support obligation."

The Bankruptcy Code defines domestic support obligation under §101(14)(A). That Section states:
The term “domestic support obligation” means a debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title, that is— 
(A) owed to or recoverable by—(i) a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible relative; or
(ii) a governmental unit;
(B) in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor or such child’s parent, without regard to whether such debt is expressly so designated;
(C) established or subject to establishment before, on, or after the date of the order for relief in a case under this title, by reason of applicable provisions of—
(i) a separation agreement, divorce decree, or property settlement agreement;
(ii) an order of a court of record; or
(iii) a determination made in accordance with applicable nonbankruptcy law by a governmental unit; and
(D) not assigned to a nongovernmental entity, unless that obligation is assigned voluntarily by the spouse, former spouse, child of the debtor, or such child’s parent, legal guardian, or responsible relative for the purpose of collecting the debt.
Basically, what this means is that a debtor (person filing bankruptcy) cannot discharge their obligation to pay alimony, maintenance, child support or anything else that would be considered support. 

The §523(a)(5) domestic support exception applies in both Chapter 7 and Chapter 13. This exception to discharge is considered self-executing, which means that the debt automatically survives a bankruptcy discharge. In other words, the recipient of such a payment does not need to file an adversary proceeding to make the debt survive the bankruptcy discharge. 

Discharge of Marital Dissolution Obligations

Section 523(a)(15) of the Bankruptcy Code makes non-dischargeable most property settlement agreements and other debts incurred through a divorce or separation or through a related agreement, court order, decree, or other applicable determination.  Specifically, the Section states:
"(a) [a] discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual from any debt (15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorcement decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit."
Examples of non-dischargeable marital dissolution obligations include the following: 
  1. Promise by one spouse to pay a percentage of equity in a home to the other spouse
  2. Promise by one spouse to pay other spouse's debts, including general unsecured debt 
  3. Attorney fees awarded to a spouse in a decree or other court order*  
Example number two above comes up frequently in bankruptcy. It is common to see a joint debt such as a credit card that is owed by both former spouses. The debtor (person filing bankruptcy) upon receiving a discharge would eliminate their personal liability on the debt as to the credit card company. However, if there is an indemnification or a hold harmless provision, the debtor could still be held liable for the debt by their former spouse. 

*The award of attorney fees to a spouse in a decree or other court order may be non-dischargeable. If the decree or court order states that the attorney fees are in the nature of support, it is likely that the fees will be non-dischargeable under §523(a)(5). If the basis for award the attorney fees is unclear, they may still be non-dischargeable under §523(a)(15) as a marital dissolution obligation. Any attorney fees incurred to enforce a judgment of divorce can also be deemed non-dischargeable under §523(a)(15). This would likely include any attorney fees necessary to enforce a property settlement or other promise included in a judgment of divorce.

The §523(a)(15) exception to discharge is also self-executing, which means that the debt automatically survives a Chapter 7 bankruptcy (see next section for more explanation). So, the recipient of such a payment does not need to file an adversary proceeding to make the debt survive a Chapter 7 discharge.   

Choosing Between Chapter 7 and Chapter 13

When deciding what type of bankruptcy is appropriate many factors must be taken into account. Understanding the differences between domestic support and marital dissolution obligations and their dischargeability under Chapter 7 and Chapter 13 is crucial for making the right decision. 

A domestic support obligation is non-dischargeable under Chapter 7 and Chapter 13. Marital dissolution obligations, defined by §523(a)(15), are non-dischargeable only under Chapter 7. Section 1328(a)(2) of the Bankruptcy Code does not include §523(a)(15), which means this type of debt can be discharged by a Chapter 13. Depending on the potential debtor's financial situation and the extent of marital dissolution obligations, this may be reason enough to file Chapter 13 instead of Chapter 7. 

Since marital dissolution obligations are dischargeable in Chapter 13, the former spouse/creditor of the debtor has an incentive to file an adversary proceeding in a Chapter 13 to determine whether the debt owed falls under 523(a)(5) or 523(a)(15). If the former spouse/creditor can demonstrated the debt is in the nature of support, they can preserve their right to collect on the debt owed to them.

The Bottom Line

If you  have significant debt and divorce is on horizon, consulting with a bankruptcy attorney before filing for divorce may make bankruptcy and divorce simpler and more cost effective. 

To determine which should come first, you should discuss your situation with a bankruptcy attorney and a divorce attorney. You should also make both attorneys aware of each other. The attorneys, if they are separate people, can work together to implement a plan that is going to get you where you need to be in the least painful way possible. 

Chapter 7 may appear to be the best option for resolving your debts, but if there are significant marital debt obligations that would survive a Chapter 7 discharge, Chapter 13 needs to be discussed with an attorney and given a hard consideration. 

Visit Law Offices of Ryan F. Beach

This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Saturday, March 14, 2015

What is Chapter 7 Bankruptcy?

Chapter 7 is a form of bankruptcy that allows an individual to make a fresh start by legally eliminating, or "discharging", debt. Filing a Chapter 7 bankruptcy can eliminate most, if not all, or your debts. It is a quick and powerful tool to put an end to financial stress, release financial obligations for unwanted real or personal property, and stop harassing creditor phone calls.

While Chapter 7 is a liquidation bankruptcy, individuals are allowed to claim certain assets and properties as exempt. Most often the available exemptions allow individuals to retain assets and properties they wish to keep. When exemptions are insufficient for keeping desired assets, individuals can pursue Chapter 13, which allows for significant debt elimination but does not involve liquidation.

By filing a Chapter 7 you can eliminate such debts as:
  • Credit cards
  • Personal/unsecured loans
  • Debt which forms the basis of judgments and garnishment
  • Medical bills
  • Past due utility bills
  • Loan deficiency debt from repossessions and foreclosures
  • Mortgages
  • Auto loans and leases
  • Qualified income tax debt
  • Overpayment of benefits associated with social security or unemployment compensation
The above list of debts that may be subject to a Chapter 7 discharge is not exhaustive. To find out if a debt you owe is dischargeable, call our office for a free phone or in-person consultation - 616.389-0629.

Visit Law Offices of Ryan F. Beach


This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Can a Probate Estate File Bankruptcy?

Rule 1016 of the Federal Rules of Bankruptcy Procedure governs what happens when a debtor is deceased. A probate estate cannot file for bankruptcy. The fresh start goal is personal to the debtor. Allowing a personal representative to substitute would allow them to accomplish indirectly what it could not directly. 

If a debtor passes after filing Chapter 7, the case will continue and the bankruptcy estate will be administered. Rule 1016 will sometimes allow a Chapter 13 case to continue after the debtor’s death, “if further administration is possible and in the best interest of the parties.”


If you or your family are going through the probate process and there were significant debts owed by the deceased individual, your questions should be directed toward a probate attorney.


Visit Law Offices of Ryan F. Beach 




This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Friday, March 13, 2015

Pawn Loans in Bankruptcy

All debts must be disclosed and treated in a bankruptcy, including a loan with a pawnshop. It is somewhat unusual to see this type of debt in bankruptcy. I suspect that is because debtors don’t think of bringing it up to their attorney and most attorneys don’t think to ask if there are any pawn loans.

If you are filing Chapter 7, you may eliminate or "discharge" the debt owed to a pawnshop; however, if the debt is not satisfied you will lose the property used as collateral. If you are filing Chapter 13, it may be possible to treat the debt in a Chapter 13 plan and save the property used as collateral.

Property of the Estate

Under 11 USC 541(a)(1), any property in which a debtor has a legal or equitable interest becomes "property of the estate." As long as the contractual or statutory (state law) redemption period has not expired, the collateral used for a pawn loan and/or the right to redeem that collateral becomes part of the bankruptcy estate. Property of the estate is protected by the automatic stay provision of the Bankruptcy Code (see 11 USC 362).

If all applicable redemption periods have expired at the time a bankruptcy is filed, the collateral or a right to redeem the collateral is not property of the bankruptcy estate and the automatic stay does not apply. This is because once the right of redemption no longer exists, ownership of the collateral vests in the pawnshop. In other words, there is no legal or equitable interest to protect. 

Automatic Stay

If an applicable redemption period has not yet expired at the time of bankruptcy filing, the pawnshop cannot take the final action to gain ownership of the property because such action would be considered an action to enforce a lien, which would be a violation of the automatic stay.

The application of the automatic stay and its effect on redemption is not absolutely clear. However, the majority of courts have held that the automatic stay provision under §362 of the Bankruptcy Code does not toll the running of the redemption period. Assuming the majority position is correct, if the bankruptcy is filed before the expiration of the applicable contractual or state redemption period, §108(b) extends the redemption period for 60 days from the filing date of the bankruptcy. Anything beyond that 60-day extension would be an impermissible creation of a property right. Property rights are created and defined by state law. So, unless some federal interest demands a different result, the filing of a bankruptcy will have no impact.

The Bottom Line

The debt owed to a pawnshop can be discharged by filing bankruptcy, but discharging the debt does not allow a debtor to save the property used as collateral. Chapter 13 may offer some limited relief, but timing is crucial. If the applicable redemption periods for the collateral have expired, a debtor’s ability to treat the pawn loan in a Chapter 13 is most likely nonexistent. If an applicable redemption period has not expired, a debtor may treat the pawn loan over the course of the later of the end date under the applicable contract, the redemption period provided by state law, or within the 60 days following the filing of the bankruptcy. The available time to treat a pawn loan is extremely short. Being aware of the limited time to treat a pawn loan will help in coming up with a successful plan to save the property.  

Visit Law Offices of Ryan F. Beach


This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Thursday, March 5, 2015

Can I Stop a Garnishment?

The laws governing garnishments are harsh. If you are being garnished, you don't need to be told that. What you need to know is that there is a way to quickly stop a garnishment and get relief from the debt that caused it. While is it not your only option, once a garnishment becomes active bankruptcy is mostly likely your best option.  

Garnishments in Michigan

Federal law places limits on wage garnishment amounts. While a state may impose stricter limits, Michigan has chosen not to. As such, federal law governs in Michigan. Creditors are allowed to garnish the lesser of 25% of your disposable earnings, or the amount by which your weekly disposable earnings exceed 30 times the federal hourly minimum wage (NOTE: different rules apply to child support). 

What Can Be Garnished

After a creditor sues you, obtains a judgment, and obtains a writ of garnishment, your wages, bank account, and state tax refunds may be garnished.  If the creditor is seeking to recover for a non-consumer debt, such as child support arrears, overpayment of unemployment benefits or social security benefits, and income tax debt, your federal tax refunds may be subject to offset or garnishment (NOTE: this is non-exhaustive list of debts that may lead to an offset or garnishment of your federal tax refund).

How to Stop a Garnishment

Once a garnishment has started, a person has very few options for stopping it. One option may be debt settlement; however, once a garnishment is in place there is very little incentive for a creditor to take less than what is owed and/or take payments at rate lower than what they will get from the garnishment. In my experience, debt settlement must be attempted prior to a writ of garnishment being entered to have any real chance of success. 

So, what other options are there beyond suffering through the garnishment, paying the debt in full, or quitting your job? Bankruptcy. Unfortunately, most non-bankruptcy options are only truly effective prior to the garnishment taking effect. Upon filing a Chapter 7 or Chapter 13 bankruptcy, an automatic stay immediately goes into effect. The automatic stay is essentially a federal court order that tells creditors that they have to stop all collection efforts, which includes harassing phone calls and letters, lawsuits, garnishment, foreclosure, repossession, seizure of property, etc. 

The automatic stay does not cause a wage garnishment or a non-periodic garnishment to stop immediately. It typically takes about 1 to 15 days for it to stop. This is because there are series of steps that must be taken before your employer, your bank or the State, can legally stop withholding funds pursuant to the garnishment order. Despite the delay in having the garnishment released, all funds taken after the date you file your bankruptcy must be returned to you in full. Bankruptcy may also allow you to recover funds that were garnished during the 90 days prior to the filing date of your case if the funds taken by the creditor exceed $600.00. 

The return of garnished funds may not be possible or may not make sense in certain situations, such as garnishment for child support arrears or garnishment for a non-dischargeable debt like student loans. Consultation with an experienced bankruptcy attorney is always necessary to determine what relief is available for your situation. 

The Bottom Line

Taking action before a judgment is entered is the best way to avoid a garnishment. Prior to a judgment being entered and a garnishment taking effect, there are many more options for resolving the debt in a way that is affordable. Consulting with an attorney that practices bankruptcy and debt settlement during the beginning stages of a lawsuit will limit your losses and give you the most flexibility on how you can resolve your debts. Unfortunately, this is not always possible. Despite legal notice requirements, many people aren't aware that they are being sued and a creditor is seeking garnishment until it is too late. However, even if the garnishment has started there is hope. Garnishment can be stopped quickly and the underlying debt can be eliminated by filing Chapter 7 or Chapter 13 bankruptcy. The faster you act, the faster you can get the relief you need.

Visit Law Offices of Ryan F. Beach

This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Wednesday, February 25, 2015

Can I Keep My Tax Refunds If I File Chapter 7?

Tax season is here again. Understandably, people filing or considering filing Chapter 7 are concerned about losing their tax refunds. The good news is that if done properly, the bankruptcy filing will most likely not cause the loss of a tax refund. Most debtors lose their tax refunds because they fail to properly disclose and exempt the tax refunds, which is common when attempting to file without an attorney or when hiring an inexperienced or careless bankruptcy attorney.

The Bankruptcy Estate

Upon filing a bankruptcy, all of the debtor's assets become property of the bankruptcy estate. The bankruptcy estate is administered by a person called a trustee. It is the trustee's job to liquidate assets for the benefit of the debtor's creditors. The Bankruptcy Code defines assets very broadly. Assets include things a debtor owns at the time of filing, will own in the future, or could own upon some event occurring. What is considered an asset is not always obvious to a layman, which is why it is so important to hire an experienced and thorough bankruptcy attorney.

What Tax Refunds Are Part of the Bankruptcy Estate

Tax refunds, or the right to receive tax refunds, are an asset in almost every Chapter 7 bankruptcy. Most debtors understand that tax refunds that they are holding at the time they file bankruptcy are an asset. Most debtors also understand that tax refunds that they will receive during the same calendar year they file bankruptcy are an asset. What most debtors do not realize is that a portion of the tax refunds associated with the calendar year the bankruptcy petition is filed are also an asset. In other words, if you file bankruptcy in 2014, a portion of the 2014 tax refunds which will be received in calendar year 2015 are part of the bankruptcy estate.

A debtor's marital status and how they file tax returns can also have an impact on how much of the refunds are part of the bankruptcy estate. Typically, if a married individual files bankruptcy without their spouse and the tax returns resulting in refunds were filed jointly, only 50% of the refunds are considered assets of the bankruptcy estate.

Tuesday, February 24, 2015

Will I Lose My Home If I File Chapter 7?

When evaluating the probability that an asset will be liquidated in a Chapter 7, a full review of a debtor's assets is necessary. This is especially true when looking at a debtor's home. 

Federal Homestead Exemption

Under the federal exemptions, a debtor may exempt equity in a home in the amount of $22,975 by using the 11 USC 522(d)(1) "homestead exemption." When it is a joint case (husband and wife filing together), the homestead exemption may be used by both debtors, which would allow for an exemption of $45,950.00.  

A debtor's ability to use the homestead exemption is reduced when other assets require exemption under the 11 USC 522(d)(5) "wild card" exemption.  If the wild card exemption is needed to protect assets of a debtor and the equity in those assets exceed $1,225.00, the debtor will need to borrow from the homestead exemption (up to $11,500.00 can be borrowed by each debtor). The wild card exemption is typically used for bank account funds, anticipated tax refunds, stocks or investments outside of an qualified retirement plan, or for assets that have value that exceeds its applicable statutory exemption.

Michigan Homestead Exemption

A debtor is not required to use the federal exemptions.  A debtor may elect to use the Michigan exemptions, which provide for a more generous homestead exemption. However, most debtors do not elect to use the Michigan exemptions because there is no equivalent to the federal wild card exemption. A consultation with an experienced bankruptcy attorney would be able to give you a better sense of what it means to elect state exemptions and if it is right for you.

Trustee Liquidation Analysis

The Trustee, when determining whether he/she will administer or attempt to liquidate an asset, will first try to determine what equity exists (market value less any liens).  Once the equity is determined or estimated, the Trustee will then look at the exemptions taken and see to what extent any of the equity is unprotected. A Trustee will not liquidate a home unless he/she thinks that they can sell it for enough to pay off all the valid liens, pay off the debtor for any valid exemptions, pay all necessary costs associated with a sale, and also have some type of surplus after the liens, exemptions and sale costs are satisfied. 

Another important thing to keep in mind is that unprotected equity does not automatically mean that the asset will be liquidated.  A Chapter 7 Trustee is often willing to negotiate a settlement with a debtor to avoid liquidation. This type of settlement generally means paying the Trustee funds equal to the unexempt equity or a portion of the unexempt equity. This can be accomplished by paying a lump sum or by installment payments.  

**A note of caution: when filing a Chapter 7, the Trustee will be examining the recorded deed and recorded mortgage(s) to see if there are any defects that would allow them to avoid the lien. Avoiding a lien is a fast way to create a large amount of equity and cause a debtor to lose their home.  This is one, among many, reasons that it is so important to hire an experienced and thorough bankruptcy attorney. 

The Bottom Line

Sitting down with an experienced bankruptcy attorney to discuss your assets in detail should provide you with a better sense of whether liquidation is likely for you. An attorney will also be able to discuss your alternatives for resolving your debt while avoiding loss of assets, such as Chapter 13 and debt settlement.

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This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Monday, February 23, 2015

Michigan Drivers Responsibility Fees

Michigan Drivers Responsibility Fees are routinely discharged in Chapter 7 and Chapter 13. However, there is an exception to discharge for debt that is “a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss.” 11 USC 523(a)(7). I believe the nature of these fees are monetary sanctions. In other words, they seem to be punitive in nature and not compensating for an actual pecuniary loss.

My interpretation of the Bankruptcy Code is that these fees should survive a Chapter 7 bankruptcy discharge (Section 523(a)(7) is a self-executing exception to discharge, so no adversary proceeding is needed). Section 1328 of the Bankruptcy Codes, which governs what is discharged in Chapter 13, does not include the 523(a)(7) exception to discharge. So, these fees are discharged in Chapter 13. The State is fully aware of the 523(a)(7) exception to discharge. They use it all the time for statutory fines related to overpayment of unemployment benefits. It may be that they've made a policy decision to allow these debts to be discharged/eliminated in their records when a person files Chapter 7.

The Bottom Line

Chapter 7 may work, it may not. Chapter 13 is definitely the route to go if you're not willing to take any chances in getting rid of Michigan Drivers Responsibility Fees. In all cases, a person overwhelmed with debt should consult with an experienced bankruptcy attorney. An experienced bankruptcy attorney should be able to evaluate your situation and help you decide the best way to get the relief you need.

Visit Law Offices of Ryan F. Beach

This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

How Will My Bankruptcy Affect My Spouse?

Only one spouse filing bankruptcy is very common. A bankruptcy filing should not impact the non-filing spouse's credit; however, the filing may cause an issue with any debt that is held jointly and any unprotected or "unexempt" assets. Consulting with an experienced bankruptcy attorney will give you an idea if there are any issues. The non-filing spouse should attend the bankruptcy consultation with the filing spouse so that these potential issues can be thoroughly explored and so that they are fully aware of any issues that may exist.

Joint Debt

If there is a joint debt and only one spouse files bankruptcy, only the filing spouse's liability on the joint debt is discharged (be mindful that some debts are or can be deemed nondischargeable). In other words, the non-filing spouse will be liable for the entire joint debt after the filing spouse receives a bankruptcy discharge.

Equity in Joint Property

If there is significant equity in joint property, there is a risk of liquidation (forced sale) by the Trustee if the filing spouse is filing a Chapter 7. Sitting down with an experienced bankruptcy attorney to do a thorough review of your assets will allow you to determine if any liquidation issues exist.

Required Information

The bankruptcy filing will require the filing spouse to provide proof of the total household income. The filing spouse will have to provide copies of the non-filing spouse's pay stubs (or other similar income statements) and tax returns, both of which involve their personal information. This information is used by the debtor's attorney and Trustee to determine such things as eligibility in Chapter 7, the plan payment in Chapter 13, and potential assets/disposable income related to tax refunds.

Visit Law Offices of Ryan F. Beach

This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

Friday, February 20, 2015

Will I Lose My Bank Account Funds If I File Bankruptcy?

One of most common questions I get from potential debtors is, "can the Trustee take the money in my bank account?" If you are filing Chapter 13, it is important to know that there is no liquidation of assets. However, you must go through a liquidation analysis and pay your unsecured creditors at least as much as they would get in a theoretical Chapter 7 bankruptcy. So, the threat of losing assets to liquidation is only present when you file Chapter 7.

The Bankruptcy Code was designed so that individuals could get a "fresh start." Part of that fresh start is making sure that an individual doesn't lose everything to Trustee liquidation. Elimination or discharging all of your debt is an incredible relief; however, it wouldn't mean much if you also lost your home, car, bank account funds, clothing, furniture, appliances, etc. To ensure a fresh start, the Bankruptcy Codes allows for certain exemptions.

Cash in a bank account is protected or exempted with an exemption referred to as "wildcard." Currently, the wildcard exemption has a limit of $12,725.00. However, your ability to exempt the bank account funds may be limited by the other assets you have an ownership in. If you have other assets that require exemption and the wild card is the only way to protect them, there may be a liquidation issue.

If you are considering filing bankruptcy, consulting with an experienced bankruptcy attorney is a must. I, like many bankruptcy attorneys, offer free consultations. When I consult with potential clients I always discuss in detail their assets and the available exemptions so that they know what to expect in Chapter 7 or Chapter 13.

Visit Law Offices of Ryan F. Beach

This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.