While we all would prefer to consider the filing of a Chapter 7 or Chapter 13 bankruptcy in Detroit to be a private matter, there are, in fact, a host of characters involved in the process.
Generally, it is true that, if you don’t tell anyone that you filed for bankruptcy, the people around you will likely never know that you did.
However, the path leading from the door to the US Bankruptcy Court to the safety of your bankruptcy discharge is littered with “parties of interest,” as the US Bankruptcy Code calls them. These players in your bankruptcy drama are worth understanding in advance, when you may still be considering filing for bankruptcy.
This Article will, in two parts, introduce you to the different characters you will, or may, encounter in your Michigan bankruptcy process.
Part 1, below, will discuss the bankruptcy “Who’s Who” closest to home.
First up, the most obvious person of interest in your Chapter 7 or Chapter 13 bankruptcy proceeding: you.
You (AKA “The Debtor”)
You didn’t need us to tell you that you’d be involved in your own bankruptcy case. But you’re worth mentioning because—nothing happens without you.
That is, it’s important to understand before you even pick up a phone and call a bankruptcy lawyer that you’re going to have to put some effort into your bankruptcy case.
Bankruptcy lawyers all across Michigan get calls every day from people who think that filing for bankruptcy means filling out a couple of forms and filing them with a court—somewhere. They often believe that they can do this “simple task” without a lawyer at all or, if they do hire a lawyer, that the lawyer will just “take care of it.”
That is not how bankruptcy works.
In a Chapter 7 or Chapter 13 bankruptcy case, an enormous amount of information must be disclosed—accurately—to the Bankruptcy Court.
You need to disclose everyone to whom you owe money (even your grandmother, even if there is nothing “on paper”), all of your assets and what they are worth, property or cash you’ve gifted or transferred away, property you’ve sold, business ownership interests, charities to which you’ve donated, and more.
Where does this information come from? From you, of course. Your bankruptcy lawyer has no magical way of knowing these things about you.
Be prepared to fill out an extensive bankruptcy questionnaire or two or three for your lawyer to ensure that your bankruptcy petition and schedules disclose everything that needs to be disclosed in the way that it needs to be disclosed.
You need to answer all question asked of you, honestly. Fully. You need to hand over whatever documentation your bankruptcy lawyers tells you to hand over.
You’re entitled to a discharge of your debt under US law—but only if you’re an “honest” and “good faith” debtor. The burden of proving that is yours.
You have the option of filing a Chapter 7 or Chapter 13 bankruptcy in Detroit, Flint, Bay City, Ann Arbor, Lansing, and elsewhere either on your own individually or jointly, with a spouse, if you are married.
If you are filing jointly, everything we wrote above about you applies to your spouse as well.
However, even if you are filing on your own without your spouse, it is important to understand that there is no such thing as “leaving your spouse out of it.”
The “Means Test” that determines whether you are eligible for Chapter 7 bankruptcy, for instance, requires disclosure of ALL sources of income in your household, including that of a non-filing spouse.
The Means Test likewise determines, in Chapter 13 bankruptcy, whether you are eligible to file a 3-year Chapter 13 payment plan rather than a 5-year payment plan.
Your Chapter 13 plan payment is premised on the full income of your entire household, whether a spouse is filing jointly with you or not.
Transfers of cash or property to a non-filing spouse or gifts to a non-filing spouse may be avoided (clawed back) by a Chapter 7 Trustee.
An uncooperative non-filing spouse (usually a male) who refuses to provide you with income documentation, for example, is a very big problem for your bankruptcy.
If your spouse does not file jointly with you, it’s true that his or her credit history or credit score will not be affected by your filing—but that does not mean that your spouse is not a “player” in your bankruptcy.
Your Bankruptcy Lawyer
We’ve already talked a lot about the information your bankruptcy lawyer will request for you. What, then, does your lawyer do for you?
Your lawyer will draft and file your petition in complete accordance with the law. Your lawyer will ensure that you haven’t made any factual omissions or misstatements that can endanger your case or even land you in jail for Federal Bankruptcy Fraud (a 5-year Federal felony).
Your lawyer will represent you at one ore more court hearings. Your lawyer will ensure that you aren’t abused or taken advantage of by Trustees or creditors’ attorneys. Your lawyer will argue the case for your discharge or Chapter 13 plan confirmation before your judge with experience, eloquence, and a full command of both local and Federal bankruptcy law.
Your lawyer will make sure that you don’t screw up your own case.
It is no understatement to claim that, without an experienced bankruptcy lawyer, your odds of safely navigating the Chapter 7 process without endangering your discharge or losing property are greatly reduced.
It is even less an understatement to claim that, without an experienced bankruptcy lawyer, your odds of successfully completing a Chapter 13 bankruptcy are pretty much nil.
Your lawyer is your best friend and your greatest asset in terms of maximizing your odds of bankruptcy success.
That said, not every lawyer is created equal.
Avoid firms that put you on an “assembly line.” A good bankruptcy attorney will never treat you like just another number.
Never hire an attorney just because they are the cheapest or offer “zero down” retainers—or because their offices are near your home or workplace.
When searching for a bankruptcy lawyer to work with, look for both experience and quality customer service.
What good is it for you that the lawyer whose name hangs on the shingle over his or her office has 30 years of experience if you only ever meet secretaries or associates with 1 or 2 years of experience?
If a law office boasts that it files 300 cases per month, how much attention do you think you will receive, personally?
The best lawyers in southeast Michigan offer a combination of serious experience and premium customer service. Shop wisely. And remember that you get what you pay for.
Your Lawyer’s Staff
Unless you retain a “true solo” bankruptcy attorney, you lawyer is likely to employ at least a few staff members. These associates, paralegals, secretaries, and receptionists all play important roles in the operation of your lawyer’s practice.
It may be that a paralegal rather than your lawyer calls you to ask you why you didn’t provide a 2019 tax return copy or other important paperwork, for example.
If you do elect to work with a bankruptcy lawyer with staff, it will be important for you to cooperate with all requests received from all staff members to make your process unfold smoothly.
That said, again, if you never speak with your actual lawyer and only paralegals or legal assistants, it is possible you’ve retained a “bankruptcy mill” in which customer service is not the highest priority.
Again, shop wisely.
Your Family Members or Friends
Again, generally speaking, no one in your social orbit will know that you’ve filed for bankruptcy unless you tell them.
However, there are exceptions.
If you’ve repaid a loan to a family member or friend within certain time periods prior to the filing of a bankruptcy case, it is possible that these funds will be “recovered” from them by a Chapter 7 Trustee.
If you’ve borrowed money from a family member or friend, they need to be disclosed as creditors in your petition and will be automatically notified of the filing by the US Bankruptcy Court.
If you’ve loaned them money, the debts owed to you need to be disclosed as assets along with the rest of your property. If you can’t “exempt” those assets, they can be recovered by a Chapter 7 Trustee.
If you’ve co-signed for a car for a family member or friend, or a mortgage, or anything else—this will entangle the friend or family member in your bankruptcy as well.
These sorts of financially enmeshed personal relationships need to be disclosed to your bankruptcy lawyer from the earliest point of your contact.
Ugh. Not your boss, too?? That jerk!
Unless you tell your boss or employer that you filed for Chapter 7 bankruptcy, it will remain your private business.
However, if you file for Chapter 13 bankruptcy, Local Court Rules in Detroit require that your Chapter 13 plan payment be made by automatic wage deduction, similar to union dues or a health insurance deduction. Thus, your employer will nearly always know that you’ve filed for Chapter 13 bankruptcy.
This is not as big a deal as you might think. Unless you work for a very small operation, odds are good that your boss has seen this before and will be unflustered by it. Small, gossipy offices are another story, and you should feel free to discuss concerns about that sort of thing with your bankruptcy lawyer prior to filing.
However, be aware that a court rule is a court rule, and there is likely not a lot that your lawyer can do about it.
If you owe your boss money, are owed money by your boss (earned but unpaid wages or commissions need to be exempted to be protected from seizure in a Chapter 7 bankruptcy), or co-own anything with your boss, see above regarding friends and family members.
Who’s Who In Detroit Bankruptcy Cases: The Bottom Line
The bottom line is that a Chapter 7 or a Chapter 13 bankruptcy case, in most instances, runs very smoothly—if you have retained an experienced and aggressive bankruptcy attorney to assist you.
Smooth or otherwise, there will be a lot of eyes on the information you provide—or fail to provide—to the powers that be in the bankruptcy system. You will want to take every step to ensure that it is accurate and fully discloses every detail that needs to be disclosed.
Attorney Walter Metzen is a Board Certified Bankruptcy Expert who has successfully assisted thousands of Chapter 7 and Chapter 13 bankruptcy clients in Metro Detroit for over 30 years. He brings years of experience to the table—but also the customer service you need to ensure the successful discharge of your debt.
Contact us now to schedule your free initial consultation.