Chapter 7
Under the current Bankrupty laws, Chapter 7 cases in the Western District of Michigan take approximately 4 to 6 months from the date of filing to the date of discharge.
The Automatic Stay
Once your case is electronically filed by our office on your behalf, an automatic stay is issued by the court. The automatic stay is a court order which prohibits:
1. Garnishments of wages and taxes;
2. Foreclosures/Sheriffs Sales;
3. Repossessions;
4. Law suits; and
5. Other collection methods by your creditors.
Within 7 to 14 days of your case being filed you will receive notice from the court and our office. This notice verifies that your case is filed and instructs you to attend a Meeting of creditors.
The Meeting of Creditors (341 Hearing)
The Meeting of Creditor's is a hearing that you must attend. You will be required to Bring a photo ID, and proof of your social security number (tax return, S.S. card, paystub, etc). At the hearing, you are placed under oath, and questioned by your creditors that attend and the Chapter 7 Trustee. The Trustee represents your creditor's interest. In most cases no creditors actually attend the meeting of creditors. If you fail to attend we will do our best to have the hearing adjourned. If you refuse to cooperate or attend the hearing your case may be dismissed, or you can incur additional attorney fees, or costs.
During the Meeting of Creditors
The Trustee is in charge of the Meeting of Creditors. He will place you under oath and I will question you briefly. Next, the Trustee and any of your creditors that attend will have an opportunity to briefly question you. Note, that compared to normal court sessions the Meeting of Creditors is a relatively informal process which the actual Judge does not even attend.
Some common questions include:
1. Did you meet with your attorney and discuss the implications of the different types of bankrutpcy;
2. Did you list all of your income, assets and debts?
3. How did you determine the value of your home and land?
4. Are you expecting an inheritance?
5. Have you given any valuable property away recently?
6. Did you repay family members any money recently?
Following the Meeting of Creditors
Once the meeting of creditors meeting is concluded, you will have about 60-90 days before your discharge is granted. During this time you can do the following:
- Add any creditors to your bankruptcy
- Sign and file reaffirmation agreements
- Change jobs, move, file taxes, buy a car
- Surrender vehicles you intend to give back
- Reinstate your mortgage agreement
After 60-90 days elapses, most cases are discharged. The Discharge Order is the Court's order formally releasing you of your obligation to pay certain debts. Keep this order as if it were a birth certificate, or marriage license. Any time a creditor calls or writes, you will provide the discharge date, and case number to settle their claim. Read the Discharge Order back and front. This will answer many of your questions.
Always keep a file of the following documents:
- The notice of filing bankruptcy /meeting of creditors
- The Bankruptcy petition filed with the court
- The Notice of automatic stay
- The Discharge order
These documents will allow you to settle any claim creditors may bring after the case is closed.
1. What is your Current Monthly Income (CMI)?
Your eligibility for Chapter 7 or Chapter 13 is decided (in part) by the Current Monthly Income (CMI). The CMI is not a matter of looking at your pay stub or tax return. Instead its a complex formula that our office will calculate for you. In many cases it is easier to qualify for Chapter 7 now, than it was under the earlier laws.
Current Monthly Income must be provided as part of your bankruptcy petition. Inaccurate CMI could result in your case being dismissed or changed to a chapter 13. It is vital that you provide all sources of income to your lawyer so your case can be processed correctly.
You will need some proof of income for the six months prior to the case being filed. For example, pay stubs, social security vouchers, payroll summaries, bank statements all help the lawyer accurately calculate your CMI. If you need assistance with this, ask the Bankruptcy staff for further assistance.
2. Can I file Chapter 7 if my household income is less than the State Median Income?
YES! Most two person household with a Current Monthly Income (CMI) less than $47,444 can file a Chapter 7. A four person household you can file a Chapter 7 if their income is less than $68,000.
3. What if my household income is greater than the State Median Income?
Do not rule out Chapter 7 even if your income is above the State Median Income (SMI). The means test is used the decide if you qualify for Chapter 7, even though your household income may appear to be above average. After subtracting allowable expenses and deductions, many households will qualify for Chapter 7.
There are several options to review in developing a bankruptcy strategy for you. Your lawyer will analyze you income, expenses and allowable deductions to determine if you qualify for a Chapter 7.
4. Means Test for Chapter 7 Eligibility
The Trustee or any creditor can bring a motion to dismiss if your income is above the state median income (SMI). If the debtor's current monthly income is less than the state median income, then they qualify for a chapter 7.
Take the Means Test to determine if your income qualifies you for Chapter 7.
The Michigan State Median Income (SMI) is $47,444. for a two person household as of October 18, 2005. If your income is lower than the SMI of $47,444. then you probably qualify for CHAPTER 7.
5. What is the definition of HOUSEHOLD?
For purposes of Chapter 7 or Chapter 13 the "household" consists of all people regularly living in the dwelling at the time of filing the case. This includes:
- Children away at school or foster care.
- Adult children living at home on a regular basis.
- Relatives or non-relatives living in the dwelling.
If you receive financial assistance on a regular basis from anyone (i.e. rent or room-and-board, etc) then include that in your monthly income.
Frequently Asked Questions about Bankruptcy in Northern Michigan
Frequently Asked Questions about Bankruptcy in Northern Michigan
1. What is a Discharge Order?
The Discharge Order is a Court order formally releasing you of your obligation to pay certain debts. Keep this order as if it were a birth certificate, or marriage license. Any time a creditor calls or writes, you will provide the discharge date, and case number to settle their claim. Read the Discharge Order back and front. This will answer many of your questions about managing debts after your debts are discharged.
2. What is a DEED in LIEU of Foreclosure?
A deed in lieu of foreclosure results in you losing your home. When you sign the deed , you give up all rights to the home. In exchange, the creditor promises not to foreclose on their mortgage. If it sounds like a raw deal, it is. Once you sign the deed, the mortgage company owns the property. Shortly thereafter you must move out. Worse yet, you do not receive payment for giving up the home. You give up all hope of selling, refinancing, or saving the home in bankruptcy . This is rarely a good option for Debtors. If your lenders sends you a "deed in lieu of foreclosure" consult your lawyer (not their lawyer or case analyst) before signing it.
3. What is a Right of Redemption?
The right of redemption is the property right you have after the sheriffs sale. It is your time period to redeem the property title back from the creditor. Your right of redemption does have value. You can sell the property, pay-off the mortgage and keep any remaining sale proceeds. This requires you to move out of the home.
You can refinance the mortgage with a new mortgage company. This is difficult to accomplish given your current credit score and income. But if you can refinance the mortgage, you get to remain in the home, and have a clean slate with the new lender.
You can stay in the home without the obligation to pay the mortgage, insurance or taxes. This period is either 6 months or 12 months from the date of the sheriffs sale. After the right of redemption expires, you are treated as a tenant. If you refuse to move out, the mortgage company will file a landlord-tenant action to evict.
4. Can I Be Discriminated Against For Filing Bankruptcy ?
No. 11 U.S.C. sec. 525 prohibits governmental units and private employers from discriminating against you because you filed a bankruptcy petition or because you failed to pay a dischargeable debt.
This means that the publicly financed hospitals, clinic and utility companies cannot refuse to service you after filing bankruptcy .
5. Can Bankruptcy Help Get My Michigan Driver's License Back?
YES. If you lost your license solely because you couldn't pay court-ordered damages caused in an accident, bankruptcy will allow you to get your license back. Liens placed on your license by insurance companies are discharged in many circumstances.
6. Do I have to PAY BACK all my creditors in a Chapter 13?
NO. Chapter 13 requires monthly payments to the US Trustee who distributes the money to your creditors - based on priority. Your house payment and car payments get paid through the Chapter 13 plan. Usually a small percentage of the payment goes to credit cards, medical bills or other unsecured claims get paid. For example, you may have $50, 000 in credit card debt. You may promise to pay $10,000 of that credit card debt over a 36 month period. So, your creditors would get $277.77 divided among them each month. At the end of the 36 month period, the unpaid balance is discharged (forgiven). In some cases Debtors pay back all of their creditors, but this rare.
7. Why would I want to file a Chapter 13?
Debtors typically file a Chapter 13 because one or more of the following exists:
- Your mortgage payment is past due and can be brought current in Chapter 13.
- Your car, mobile home or installment payments can be lowered in a Chapter 13. - You need HomeTown Bankruptcy to stop a foreclosure or sheriffs sale.
- Your current monthly income requires you to pay back some or all of your creditors. - Your home equity or other property exceeds the amount allowed in Chapter 7.
- There are payments that are easier to pay in Chapter 13 than outside of bankruptcy (taxes, past due child support, student loans, restitution for example).
There may be reasons unique to your case which cause your HomeTown Bankruptcy attorney to recommend a Chapter 13 strategy.
8. What about Co-signers?
If someone has co-signed a loan with you and you file for bankruptcy , the co-signer may have to pay your debt. This applies to relatives and non-relatives. Before your co-signer pays the debt, have the creditor provide written proof that the co-signer ACTUALLY SIGNED. If there is no written contract, the creditor cannot collect from the other party.
9. I'm Married, Can I File by Myself?
YES. In most cases the debts are joint, so its more effective for both to file. But if only one spouse is responsible for most or all of the debt, then only that spouse should file.
10. Can filing bankruptcy stop bill collectors from calling?
YES. The automatic stay prevents bill collectors from taking any action to collect debts.
11. How long after filing will the creditors stop calling?
IMMEDIATELY!!! Once you or the court provides notice to the creditor, they MUST stop their collection efforts. If they ignore the notice, they can be found in CONTEMPT OF COURT.
After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. Creditors will also stop calling if you inform them that you filed the bankruptcy petition, and supply them with your case number. In some cases, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a law suit is pending. If a creditor continues to use collection tactics once informed of the bankruptcy they may be liable for court sanctions and attorney fees for this conduct.
12. Are Utility Services Affected?
Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy . However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.
13. Can I Get a Credit Card After Bankruptcy ?
Yes, there are several options available. While technically not a credit card you could use a bank or debit card to perform activities for which you normally would use a credit card. You also may be able to keep the credit card you already have if the creditor grants approval. If these options do not work you can get secured credit card which is backed by your own bank account.
If you want to keep a credit card you must reaffirm the debt. This is not advisable since you will probably qualify for a similar credit card shortly after your debts are discharged. Even if the balance is zero at the time you file, credit card companies consider the filing a default in the credit contract and suspend your credit privileges. There is no sense reaffirming a debt that would otherwise be discharged, and one that offers no credit.
14. Will Bankruptcy Affect My Credit?
The bankruptcy filing becomes insignificant as time passes. In my opinion, you'll have a better credit score six months after discharging your debts. You will be a better credit risk after bankruptcy since you will have fewer creditors to pay with your income.
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcy will probably not make things any worse. The fact that you've filed a bankruptcy can appear on your credit record. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.
Two years after a bankruptcy discharge, debtors are eligible for conventional mortgage loans. During the two years leading up the mortgage you should focus on stabilizing your income, employment, and address. Keep your credit cards to a minimum. If you have a car payment, pay it on time, every month. Show the lender you follow a budget. These practices will far outweigh any short term damage to your credit score that the bankruptcy filing might cause.
About Attorney Gerald Chefalo
Admitted: 1998, Michigan
Law School: Thomas M. Cooley Law School, J.D., 1997
College: Michigan State University, B.A., 1994
Member: Antrim County, Leelanau County, Grand Traverse County and American (Member, Criminal, Probate, General Practice, Divorce and Family Law Section) Bar Associations, American Bar Association, and National Association of Criminal Defense Attorneys.
Biography: Recipient, Book Award for Defending Battered Women, 1997.
Born: Flint, Michigan, January 30, 1971
In Addition, Attorney Chefalo has worked with two Circuit Court Judges and has written several opinions in the areas of Criminal, Divorce and Civil Litigation.
In April of 2002, Attorney Chefalo also completed his first open murder trial in Antrim County, Michigan.
Attorney Chefalo has also defended numerous life offense cases in Antrim, Leelanau and Grand Traverse Counties. Attorney Chefalo has also been successful in having several life offenses (as well as other lower severity cases) cases dismissed prior to trial. Including an armed robbery case with two additional co-defendants.
Attorney Chefalo enjoys living in Northern Michigan. Especially the summer months where he spends a majority of his free time on his boat in Long Lake wakeboarding.