- What Is Chapter 7 Bankruptcy Exactly?
- What Is Chapter 13 Bankruptcy?
- Things That Family & Friends Can Do to Help With Your Bankruptcy Process
- Things That Family & Friends Can’t Do to Help With Your Bankruptcy Process
- How a Metro Detroit Bankruptcy Attorney Can Help
A Chapter 7 or Chapter 13 bankruptcy filing is often something you want to keep to yourself. Frequently, people who file bankruptcy in Detroit do not wish to reveal that information even to close friends and family.
The media and many religious leaders continue to propagate the idea that you should be ashamed of yourself if you file for bankruptcy.
This is nonsense. Filing for bankruptcy is your legal right. Further, you are legally entitled to file for bankruptcy just as your creditors are legally entitled to sue you for breach of contract if you fail to make a monthly credit card installment payment due to unforeseen circumstances.
You are not ashamed to miss a day of work because you broke your leg, right? If you miss a credit card payment because of that missed day at work or cannot afford to pay the hospital bill resulting from that injury, you should likewise feel unashamed.
Relieving yourself of unmanageable debt is a service to the US economy at large.
That is, if you are spending money on goods and services rather than having your wages garnished, you are keeping businesses afloat. You are fully participating in the US economy in a constructive way that does not simply benefit a single creditor’s outrageous interest rate.
Filing bankruptcy in Michigan is a win-win for everybody—except that creditor. But it will take a healthy tax write-off from the discharge of your debt.
That’s nothing to be ashamed of.
Generally, when you tell friends and family members that you are filing Chapter 7 or Chapter 13 bankruptcy, they will want to help you rather than condemning you.
This is a good thing. However, it can also be unhelpful at times.
We discuss why below. First, however, some basics about the Michigan bankruptcy process.
What Is Chapter 7 Bankruptcy Exactly?
Chapter 7 is the form of bankruptcy that does not require that you repay any money to your creditors.
Instead, if you own property that is high-value or is luxury (not necessary to live) property, that property may be taken from you, sold off, and the resulting sale proceeds paid out to your creditors.
Chapter 7 is a “liquidation” bankruptcy, in other words.
Regardless, most people in Metro Detroit who file Chapter 7 bankruptcies do not lose any property at all.
This is because the US Bankruptcy Code allows you to “exempt” certain types of property up to certain value limits from the “bankruptcy estate” that is created automatically upon filing of the case. If property is “exempted” up to its value, it cannot be seized and liquidated.
If the property cannot be fully exempted, it may be liquidated.
Who does the liquidating?
The property is seized and liquidated by the Chapter 7 Bankruptcy Trustee.
Generally, when no property is liquidated and there are no allegations of fraud made, the Chapter 7 process takes about 4 months. It usually requires just 1 “court” appearance: the 341 Meeting of Creditors.
The 341 Meeting is an opportunity for you to be questioned regarding your assets and debts on the record by either the Chapter 7 Trustee or your creditors. It is scheduled approximately 30 days from the date of filing.
Your discharge is typically issued and your case closed 60 days after the conclusion of the 341 Meeting.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is not a liquidation process. It is a process of reorganization.
That is, Chapter 13 is a court-supervised, structured payment plan in which you make a monthly payment to the Bankruptcy Court toward the debt that you owe.
It is not a “debt consolidation,” however. In Chapter 13 bankruptcies, you pay what you can afford to pay—and discharge the balance.
Your monthly “Chapter 13 Plan” payment amount is premised upon the amount of your household’s “net” average monthly income. That is, it is the amount that is left over after your necessary household expenses are deducted from your combined household take-home pay.
You send that payment amount each month to the Chapter 13 Trustee. The Chapter 13 Trustee does not liquidate property as does the Chapter 7 Trustee. Instead, it is the Chapter 13 Trustee’s role to receive your monthly payment and, then, to disburse it out to your creditors in a priority order based upon the type of debts involved.
Secured and other “priority” debts are paid ahead of “non-priority” debts like medical bills and credit card balances. Those non-priority, unsecured debts are paid at the end of the Chapter 13 Plan whatever remains after priority and secured debts are paid. Whatever that amount is, that’s all they get.
The balance you may still owe unsecured creditors “on paper” is totally discharged at the end of the Chapter 13 process, just as in Chapter 7.
A Chapter 13 bankruptcy allows you to, for example, pay home mortgage payment arrears first, saving a home from foreclosure, rather than paying unsecured credit card debt.
It is typically a 3-5-year process and requires at least 2 court hearings. The first of these is the 341 Meeting of Creditors.
Things That Family & Friends Can Do to Help With Your Bankruptcy Process
When you do tell your friends or family members that you plan to file for Chapter 7 or Chapter 13, they will want to help (hopefully).
The things with which your family and friends can be helpful are as follows:
The most important thing that friends and family can do to help you through a bankruptcy process is to simply be positive. They should encourage you to take advantage of the legal option to resolve your debts and move forward with your life.
Friends and family members who offer thoughts that are less encouraging should be kept at arm’s length. Everyone has that guy in the family who thinks he’s a lawyer despite the fact that his paycheck comes from Kroger. He should keep his thoughts to himself.
Bankruptcy is a stressful process even in the easiest of cases. Friends and family members should help to alleviate that stress rather than compounding it.
Recommending Good Michigan Bankruptcy Attorneys
Not sure where to look first for a good, experienced Michigan bankruptcy attorney? Friends and family members can be especially helpful in your search.
The first listings you’ll see on Google, for instance, are simply the ads purchased by those bankruptcy lawyers who paid the most for the listing.
Is that attorney in the #1 spot really the best in Detroit? Or is it just the one most willing to pay a bunch of money for that position?
A referral from a friend or family member who has had or knows someone personally who has had a positive experience with a bankruptcy attorney is the first and best place to look for legal assistance.
This is always the best way to find any kind of lawyer, rather than simply looking for the first listing on Google, the cheapest, or the closest to your home.
Helping to Gather Documentation
Even a “simple” Chapter 7 bankruptcy process requires that you gather an enormous amount of paperwork to give to your bankruptcy lawyer.
The documentation required to file a Chapter 7 bankruptcy case includes income documentation, real estate deeds and mortgage copies, bank statements, divorce judgments, tax returns, vehicle titles, and more.
It’s a lot of work for 1 person. A spouse or other immediate family member may be very helpful in helping you to gather, collate, and organize the required documentation.
Lawyers work with large amounts of paper every day. You do not, necessarily. It’s very helpful to have an extra set of hands or eyes on your side to ensure that you managed to get all of it and completely.
Accompanying You to Hearings
“Can my mom come with me?” is one of the most common questions bankruptcy attorneys receive from clients.
Yes, your mother and any other friend or family member is free to accompany you to your 341 Meeting of Creditors or related court hearings. Everyone needs a hand to hold from time to time. The hearings are open to the public.
A few caveats here, however: small children should be left at home, and there is always limited seating available.
Don’t bring your entire clan to your 341 Meeting. Your party will just inconvenience everyone else there that day. Chapter 7 Trustees in particular are generally not amused by interruptive children, to say the least.
And that’s it. Your friends and family members may want to help much more than this. However, they should not. And you should not let them.
Everyone involved in the process, from your bankruptcy attorney to your Chapter 7 or Chapter 13 Trustee to the US Trustee to your Judge, will presume and require that you gathered your own documentation. It will be expected that you have completed and reviewed your own petition and questionnaires. You must have knowledge of the contents of those things.
You will be the one answering questions at your hearing; not your spouse or friend.
Things That Family & Friends Can’t Do to Help With Your Bankruptcy Process
That being the case, there are a number of things that your friends and family members should not help with.
- Completing or signing any documentation for you;
- Giving you legal advice;
- Shouting out or speaking for you at your court hearings;
- Receiving gifts or transfers of property from you before or after filing (and, of course, you should not gift or transfer anything to them!);
- Demanding payment from you for debts that you owe them (friends and family members can be creditors, too!);
- Communicating with your bankruptcy attorney for you.
Unless you suffer from a disability or do not speak English as a first language, your bankruptcy attorney is ethically obligated under Michigan state law to communicate confidentially only with his or her client. Unless you authorize a relative to communicate with your attorney on your behalf, all communications will be with directly with the client and only the client.
How a Metro Detroit Bankruptcy Attorney Can Help
If you are considering filing for bankruptcy in Metro Detroit or Flint or Bay City, you will need help. But, generally, not the sort of help that a family member or friend can provide.
You need the assistance of an experienced, licensed Michigan bankruptcy attorney.
Attorney Walter Metzen is a Board Certified Bankruptcy Expert who has successfully helped thousands of Metro Detroit Chapter 7 and Chapter 13 clients for over 30 years.
If you have questions about bankruptcy, contact us now to schedule your free, initial consultation.