Bankruptcy & Debt Relief

Many people who should consider filing for bankruptcy do not even see bankruptcy as an option. In reality, bankruptcy is the best option for many people. The attorneys at Baumstark & Vincent, PLLC will sit down with you to discuss your particular situation and circumstances and help decide if filing is the right choice.

Bankruptcy in most situations can completely clean the slate of credit card and medical bills. Thanks to bankruptcy exemptions, most people do not lose any of their property during the process. With a debt relief attorney, you'll be able to obtain a fresh start, and move on to achieve all of your financial goals. Although there has been a stigma placed on bankruptcy, many people are able to begin reestablishing their credit shortly after discharge.

Our office specializes in Chapter 7 and Chapter 13 bankruptcy. There are advantages to both, depending on what your current circumstances are. Has your home undergone the process of foreclosure? Chapter 13 bankruptcies are intended for individuals just like you who are struggling to save their homes. Filing can stop foreclosure in its tracks. Mortgage deficiencies can also be included in your bankruptcy, and a repayment plan to creditors is established through a Chapter 13 Plan. If you're feeling overburdened with medical and credit card bills, filing a Chapter 7 may be a better suited option. This type of bankruptcy will wipe out debt owed to unsecured creditors, including foreclosure and repossession deficiency balances. Our bankruptcy lawyers will help you discover the correct path for your debt solution needs.

Frequently Asked Questions

I think the bankruptcy laws have changed; can I still file a Chapter 7?

Yes you can. Although the bankruptcy reform initiative which occurred in October of 2005, was intended to reduce the number of Chapter 7 filings in America, there are still a great many Chapter 7 bankruptcies being filed.

Will filing bankruptcy stop harassing phone calls?

Yes. The first event which occurs when an individual files a bankruptcy is the issuance of what is called an Automatic Stay Order. The Automatic Stay Order is sent to each of the debtor's creditors and unequivocally states that the creditor must leave the debtor alone. In other words, if a creditor harasses, calls, sues, or otherwise bothers a debtor who is under the protection of the Bankruptcy Court then that creditor may be subjected to sanctions by way of a Motion for Contempt of Court inside the Federal Bankruptcy Court. Creditors almost always follow the Order and stop the harassment and it is very rare for a debtor to have to enforce the Order in Court. The penalties for violating the Automatic Stay Order can be severe.

Why do people file a Chapter 13 bankruptcy?

There are a series of reasons why a person files a Chapter 13 bankruptcy. The first is if they make so much money that the bankruptcy court would not allow them to obtain a complete forgiveness of their debts. If a person can make a meaningful repayment to their creditors then they must file a Chapter 13 bankruptcy which is a repayment plan in which they pay some portion of their principal balance and receive a discharge of their remaining indebtedness. Another reason why a person will file a Chapter 13 bankruptcy is if they are behind on their house and they wish to present a foreclosure. In Chapter 13 a person can make up their missed mortgage payments over time and reconstruct their mortgage. It is important to understand that the bankruptcy must be filed prior to any foreclosure in order for the foreclosure to be prevented. Other people file a Chapter 13 bankruptcy in order to take advantage of certain benefits that they can receive in regard to vehicles. The first of these benefits is that if a vehicle payment is not up to date the debtor can prevent repossession and restructure those payments over time. Also, if a debtor is paying a very high interest rate on a vehicle a Chapter 13 bankruptcy can be used to reduce the interest rate. Furthermore, if a vehicle loan was made more than 2 years before the bankruptcy is filed a so called cram down can occur. A cram down is when a vehicle is worth less than the amount that is owed on the vehicle and the debtor classifies the value as a secured claim, meaning that the vehicle is paid in full with applicable interest up to its value, and the balance of the debt is classified as an unsecured claim which is paid mere pennies on the dollar. For example, if a debtor's vehicle is worth $10,000.00 and the debtor owes $18,000.00 and that loan is more than 2 years old then the debtor can pay the $10,000.00 with contract interest, or a reduced interest rate, and classify the other $8,000.00 exactly like a credit card or medical bill meaning that the debtor can modify the debt and pay pennies on the dollar on same. Another reason why a person files a Chapter 13 bankruptcy is if they have significant tax debt. Tax debt can be prioritized and paid in full while other creditors are not being paid in full. Furthermore, Chapter 13 bankruptcy stops interest and penalties on income tax debts. Another reason why a person may file a Chapter 13 bankruptcy is if they cannot file a Chapter 7 bankruptcy because they have filed a Chapter 7 bankruptcy before. When a person files a Chapter 7 bankruptcy they enter a prohibition period where they cannot file another Chapter 7 for 8 years. However, they can file a Chapter 13 bankruptcy after 4 years, so sometimes a person will file a Chapter 13 bankruptcy because they are not eligible for a Chapter 7.

Why do people file a Chapter 7 bankruptcy?

People file a Chapter 7 bankruptcy when they feel they have no other legitimate choice. A person who files a Chapter 7 generally cannot obtain a loan, does not have assets that can be liquidated in order to pay their debts, does not have any lump sums on the horizon such as an inheritance or a reason for which they can sue some person or business for money, and have no wealthy relations to turn to. Furthermore, a typical Chapter 7 debtor cannot afford to pay their full principal balance even with reduced interest such as in an accredited credit counseling program. A Chapter 7 debtor is generally collectable as well in the sense that if they do not pay their creditors and do not go bankrupt then the debtor will experience the garnishment of their paycheck as well as the seizure of their bank accounts, if a creditor sues them and obtains a judgment. If the person simply has no other option other than filing a Chapter 7 or having their paycheck garnished they will often file a Chapter 7 bankruptcy in which they ask for a complete forgiveness, or discharge, of their debts.

Are there debts that bankruptcy will not erase?

Yes. Student loans are generally non-dischargeable in bankruptcy. Income tax debts from the last three years are also non-dischargeable. If a debt is accrued through means that are immoral or illegal then it is very likely that the Judge will not erase those debts. For example, if a debtor severally beats a victim and the victim sues the debtor and receives a civil judgment then that civil judgment will not be discharged in that debtor's Chapter 7 bankruptcy proceeding. It is also common for debtors to decide that they do not wish to discharge certain debts. For example, many people decide to keep their houses and cars in a bankruptcy. This is called a reaffirmation.

What assets will I be able to keep?

In a Chapter 7 bankruptcy there are limits in terms of how much property an individual can keep. The amount of property that an individual can retain is called that individuals exemption limit. There are different exemption limits for different properties and they change from time to time. Most debtors in Michigan choose to use the Federal Exemptions rather than the state exemptions as the Federal exemptions are much more generous for most people. In terms of real estate the present Federal exemption is $ $21,625 per deed holder. There is also a so called wild card exemption which allows a debtor to keep anything they wish. The wild card exemption ranges from $1,075.00 to $11,200.00 per individual and can be used to exempt anything. The vehicle equity exemption is $ 3,450. The general household goods exemption is $ 11,525. The jewelry exemption is $ 1,450. The tools exemption is $ 2,175. Almost all retirement plans are fully protectable in bankruptcy. A debtor is also able to repay your retirement loans in a bankruptcy. In Chapter 7 if a person owns more than they are allowed to keep then it is the Trustee's duty to gather the non-exempt assets and liquidate them on behalf of that debtor's unsecured creditors. In Chapter 13 the liquidation of assets is not generally an applicable concept. In Chapter 13 there is an asset test which is used to determine how much each individual debtor must pay. This is often referred to as the Best Interest Of Creditors Test. However, sometimes the results of the asset test are such that a person could not meet the asset test result without the liquidation of assets which is why sometimes there is a liquidation of assets in a Chapter 13 bankruptcy. Generally speaking, to the degree that a debtor has non-exempt assets in a Chapter 13 they must match that non-exempt portion to their unsecured creditors on a dollar for dollar basis over the life of their repayment program.

What are the different kinds of bankruptcy?

The most common type of bankruptcy is called a Chapter 7 bankruptcy. A Chapter 7 is a complete bankruptcy in the sense that it is for people that cannot pay any portion of their debt load either through asset liquidation or their income stream. In other ords, Chapter 7 is suitable for people who do not own much in terms of assets and are barely able to make ends meet in terms of their income and living expenses. Another type of consumer bankruptcy is called Chapter 13. Chapter 13 is a repayment plan. In a Chapter 13 a debtor pays all or some portion of the principal balance of their debt load and receives a forgiveness or discharge of the remaining indebtedness. There is also a type of bankruptcy called a Chapter 11 which is a repayment plan for Corporations, Limited Liability Companies, and individuals who owe particularly large sums of money. Finally, Chapter 12 is a reorganization plan for farmers.

What is Bankruptcy?

Bankruptcy is a legal process by which a debtor approaches a Federal Bankruptcy Judge in an effort to obtain the forgiveness of all or a portion of that debtor's debts. A successful bankruptcy ends in what is called a discharge, which forgives or eliminates all or significant portions of a debtor's debt load.

How will bankruptcy affect my credit?

A Chapter 7 is on your credit report for 10 years. A Chapter 13 is on your report for 7 years. Most people who file bankruptcy have terrible credit scores on the day that they file. This is because they have a high debt to income ratio and a record of recent delinquencies because they are not paying their bills. People who file bankruptcies generally cannot obtain any significant loan before they file their case. When a bankruptcy discharge is received it often improves a debtor's credit in the sense that a person can often obtain loans when before they could not. However, they often pay high interest rates for the loans. Bankruptcy does not affect the ability of an individual to go to the emergency room if that individual is sick. Hospitals must accept everyone in emergency rooms. Further, bankruptcy is not intended to stop a person from obtaining their educational goals. Filing a bankruptcy will not prohibit you from obtaining a student loan in the future or your children. Bankruptcy does affect interest rates for all types of loans.

How can co-signers be protected in bankruptcy?

In a Chapter 7 bankruptcy if there is a co-debtor account then the individual going bankrupt can continue to make payments on the account despite the bankruptcy. If the co-signed account is a secured account such as a car or a mortgage then the debtor can sign what is called a reaffirmation agreement which is a formal reinstallation of the debt. If a debtor reaffirms or continues to make payments then generally the co-debtor will not be bothered by the creditor in relation to the debt. In a Chapter 13 bankruptcy a debtor can protect a co-debtor completely by creating a special class in which to pay the co-debt in full with interest. Ultimately, it is up to the bankruptcy Judge in charge of the Chapter 13 case whether or not a special co-debtor class will be allowed in any particular case.