As a consumer bankruptcy attorney, I help people eliminate their credit card debt by filing Chapter 7 bankruptcy petitions in the United States Bankruptcy Court.  As unemployment is on the rise and frivolous spending continues, now more than ever people are relying on their credit cards to pay for everything that they do. 

Chapter 7 can provide debt relief to those who have run up their credit cards and cannot pay them back. 

It is not for people who have alot of property or who have run up their credit cards and created debt with no intention of paying it back.  That is fraud, and it is not tolerated.  In my experience, at least 90% of people who need to file Chapter 7 bankruptcy are good, hard working  people who, for a myriad of reasons, got in over their heads and need a fresh start. 

If you find yourself in that position, call me, at 734-722-2999, or fill out a contact form to the left and I will get back to within 24 hours.

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Michigan bankruptcy exemptions also increase every three years to adjust for inflation, and on March 1, 2023, they will increase by 14%. (For reference, the increase three years ago was approximately 6%). A bankruptcy debtor in Michigan may choose whether to use the exemptions provided under either federal or state law to “exempt” a certain amount of property from the bankruptcy estate and use it for a fresh start.

Most Michigan debtors who file for bankruptcy protection rely on the federal Bankruptcy Code exemptions because they usually provide the most protection in aggregate. Some, however, will opt for the state-specific exemptions because they provide greater protection for specific assets the debtor wishes to shield. For example, the federal exemption for equity in a debtor’s residence is currently $27,900. The corresponding Michigan state exemption for most debtors is currently $40,475 and will rise to $46,125 on March 30, 2023. The Michigan exemption for those who are over age 65 or disabled will rise from the current value of $60,725 to $69,200. Thus, unmarried debtors with home equity sometimes find the state exemptions more favorable. The comparison is slightly more complicated for married couples, but similar logic applies. For these and other similar reasons, both debtors and creditors should take notice when the Michigan exemption limits are adjusted.

Call Firebaugh & Andrews for your free evaluation 734-722-2999

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It can be confusing to distinguish between the different types of bankruptcy and to know when it’s appropriate to file for it.

In this guide, we’ll cover Chapter 7 and Chapter 13—the two most common types of bankruptcy—and will explain what happens when you declare bankruptcy, how to do so, and questions you should ask yourself to determine whether bankruptcy is right for you.

Overview: What Is Bankruptcy?

Bankruptcy is a legal process for individuals or companies that are unable to pay their outstanding debts. You can go bankrupt in one of two main ways. The more common route is to voluntarily file for bankruptcy. The second way is for creditors to ask the court to order a bankruptcy.

If you decide to file for bankruptcy yourself, there are several ways to do so. You may want to consult a lawyer before proceeding so you can figure out the best fit for your circumstances.

Chapter 7 vs. Chapter 13: What’s the Difference?

Chapter 7 and Chapter 13 bankruptcies are two different approaches to resolving outstanding debts:

• Chapter 7: Liquidate your assets and pay off debt with cash
• Chapter 13: Work out a payment plan for unresolved debts

What Is Chapter 11?

There are other types of bankruptcy filings that are less common and more costly for small businesses, such as Chapter 11. This type of bankruptcy is for businesses with $2.5 million or more in debt, or for businesses owned by LLCs or partnerships. A Chapter 11 bankruptcy is similar to Chapter 13 but is usually only for businesses.

This type of bankruptcy:

• Involves a creditors’ committee appointed by an independent trustee
• Reorganizes the company according to a plan that creditors vote on
• Sets up a payment plan for the company to repay its debts

The Small Business Reorganization Act of 2019 made Chapter 11 less costly for small businesses, allowing them more flexibility to negotiate terms of the bankruptcy with creditors. But this is still much less common than Chapter 13. You may want to speak with a lawyer if you feel like a Chapter 11 bankruptcy is right for your company.

What Happens When You Declare Bankruptcy?

Filing a bankruptcy petition automatically stays your creditors’ claims against you. This means that your creditors have to stop trying to collect the money you owe them. They will not be able to:

• Call you to collect debts
• Repossess your car
• Foreclose on your home

Your case will be assigned to a bankruptcy trustee, who is a lawyer who will oversee your case. The trustee will send notices to your creditors and schedule a hearing.

From there, the procedure depends on whether you’ve filed for protection under Chapter 7 or Chapter 13 of the federal Bankruptcy Code.

What Happens When You File Chapter 7?

Chapter 7 is one of the most common types of bankruptcy. In a Chapter 7 bankruptcy, you will:

• Forfeit many of your assets to be sold for cash
• Pay your creditors with the money from your asset liquidation

There are certain assets—such as a limited amount of cash, clothing, household items, and a car—that you are allowed to keep, but these exemptions vary depending on the state you live in.

Once your assets are liquidated and creditors are paid, any remaining debts you owe are forgiven unless you’ve reaffirmed the debt. Debt reaffirmation is when you voluntarily waive protection through the bankruptcy discharge and agree to remain responsible for the debt. Reaffirmation is chosen to retain certain assets and avoid liquidation.

Not everyone can file a Chapter 7 bankruptcy. If your income is too high, you may be required to file a Chapter 13 bankruptcy instead.

What Happens When You File Chapter 13?

If you can’t file a Chapter 7 bankruptcy, or if you have some money to pay creditors and there are assets that you want to keep, a Chapter 13 bankruptcy may be an option for you. In a Chapter 13 bankruptcy, you will:

• Develop a plan for making payments to your creditors over a three-to-five-year period, depending on your income
• Make all of your payments on time to said creditors
• Complete a budget counseling course

After these milestones are complete, the remainder of your debt that is eligible for discharge will be erased.

Chapter 13 is a good option for someone with a steady income who has some money left over every month to make debt payments but who needs some breathing room and extra time to get caught up.

How Does Bankruptcy Affect Assets and Liabilities?

Depending on how you choose to declare bankruptcy, your assets and liabilities will be affected in different ways. In a Chapter 7 bankruptcy, many of your assets are up for liquidation to pay your creditors with the proceeds. In Chapter 13, you retain assets while working on a repayment plan for your outstanding debts.

See how bankruptcy affects assets and debts in the following debtee categories.

Small Business Owners

For small business owners with lots of personal debt, bankruptcy may help them continue to stay in business. It’s important to note that business debts aren’t alleviated with Chapter 7 or Chapter 13 unless you’re a sole proprietor and are personally responsible for them.

• Chapter 7: For sole proprietors, business and personal debts can be wiped out in a single bankruptcy case. You’re not obligated to meet income requirements if your business debt exceeds your personal debt.
• Chapter 13: Your business assets aren’t liquidated, but only your personal liability for business debts can be wiped out. The business remains responsible for its debts.

Some business assets can be exempt from Chapter 7 bankruptcy filings. For instance, if your business is service-based and doesn’t maintain equipment or significant inventory, you can likely continue to run your business after discharging business debts through bankruptcy.

Student Loan Holders

No form of bankruptcy can relieve student loan debt. Certain people, such as some government employees, are eligible for student loan forgiveness unrelated to bankruptcy filing.

If you need help managing your student loan debt, you should look to your creditor to help manage repayment options or look into debt consolidation.

Mortgage Holders

In a bankruptcy petition, your home and mortgage will be noted as assets to determine your ability to repay. Depending on the type of bankruptcy filing you pursue, your mortgage might be affected in different ways:

• Chapter 7: Your home can be liquidated to repay your debt unless you reaffirm your mortgage and assume responsibility for repayment post-bankruptcy.
• Chapter 13: Your home is not liquidated, and you’re responsible for paying your loan under the terms set by your repayment plan under the bankruptcy.

If you choose to reaffirm your mortgage in a Chapter 7 bankruptcy, you could be stuck with the liability for your loan after your bankruptcy proceedings. If you’re unable to repay, you won’t be able to declare Chapter 7 bankruptcy again for several years, and creditors may be able to sue you to collect on the loan.

How Do I Declare Bankruptcy?

To declare and file bankruptcy, you are required to complete a credit counseling class to learn about bankruptcy, alternative options, and managing your finances on your own.

After completing the course, you must submit a petition to the U.S. bankruptcy court in the federal judicial district where you live. This petition will list your:

• Assets, such as cars, homes, and bank accounts
• Monthly income and expenses
• Creditors and how much you owe them

You’ll also need to submit a copy of your most recent tax return with your petition. You can have an Firebaugh & Andrews prepare the petition for you.

Fling for Chapter 7

Chapter 7 is sometimes referred to as a “straight bankruptcy.” A Chapter 7 bankruptcy liquidates your non-exempt assets to pay off as much of your debt as possible. The cash from your assets is distributed to creditors like banks and credit card companies, and you typically receive a notice of discharge within four months.

To file Chapter 7, you must pass a bankruptcy means test. The only people exempted from this are disabled veterans filing for bankruptcy to discharge debt incurred while they were on active military duty or people with debt that comes from operating a business.

The record of your bankruptcy will stay on your credit report for 10 years. But for many people, Chapter 7 offers a fresh start.

Filing for Chapter 13

A Chapter 13 bankruptcy is also known as a reorganization bankruptcy. Chapter 13 enables people to pay off their debts over a period of three to five years. For individuals who have consistent, predictable annual income, Chapter 13 offers a grace period. Any debts remaining at the end of the grace period are discharged.

Once the bankruptcy is approved by the court, creditors must stop contacting the debtor. Bankrupt individuals may then continue working and paying off their debts over the coming years and still keep their property and possessions.

When To Declare Bankruptcy: 8 Questions To Ask Yourself

Most people take their financial obligations seriously and want to pay their debts in full, but knowing when to file bankruptcy and when to negotiate or use another strategy can help put you on the road to financial health.

Here are a list of questions that can help you assess your financial health and give you insight into whether bankruptcy may be right for you. You should also discuss these questions with an attorney.

1. Do I Only Make Minimum Payments on My Credit Cards?

Credit cards typically carry high interest rates on open balances. This means that your balance can quickly balloon if you’re only making minimum payments. If your balance was high to begin with, it could spiral out of control quickly.

2. Do I Get Calls From Bill Collectors?

Constant phone calls from collectors can be irritating and stressful reminders of your debt. Contact each of your creditors and see if they are willing to negotiate a lower balance or lower monthly payments.

3. Do I Use Credit Cards To Pay For Necessities?

Paying for basic necessities with a credit card causes those purchases to accrue interest. For this reason, you should aim to only pay for these items with a debit card.

4. Have I Considered, or Am I Considering, Debt Consolidation?

Debt stems from many sources. Consolidating your payments into one large loan can help you more easily keep track of outstanding debts with one monthly payment. This can also extend more time to your repayment as the new loan will come with new payment terms.

5. Can I Pay Down Debts by Selling Some Possessions?

It can be hard to confront downsizing from a home or getting rid of a car, but taking these difficult steps could allow you to pay off debts and avoid a bankruptcy filing.

6. Do I Owe More Than I Pay?

Your expenses should ideally be covered by your income with some buffer room for emergencies. If your monthly payments exceed your take-home pay, you’re a potential candidate for bankruptcy.

7. Am I Unsure How Much I Actually Owe?

Uncertainty about your total outstanding debts is cause for concern. Whether your balances have grown larger and you’re unaware of the total, or you’ve forgotten creditors that have sent your debt to collections, you should consider alternative repayment options if you can’t tabulate how much you owe.

8. Will a Bankruptcy Actually Resolve My Debts?

Bankruptcy does not resolve all debt indiscriminately. Some debts, such as student loans, cannot be discharged in bankruptcy. If you’re having trouble making payments toward debts that bankruptcy won’t cover, you should speak with your creditors to determine your options.

Call us for a free consultation 734-722-2999

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Let’s consider a basic timeline of events leading up to and following the housing bubble.

The United States saw a massive increase in mortgage fraud from 1997-2005. This contributed to the housing bubble that seemed to grow from approximately 2001 to 2005. In 2003, several actions were taken by the US government to make home ownership easier to accomplish for more Americans. In 2004, US home ownership peaked with an all time high of 69.2%. In 2005, we saw the bubble burst or, in other words, we saw the housing market correction in action. The booming housing market came to an abrupt halt in 2005. From the 4th quarter of 2005 to the first quarter of 2006, median housing prices nationwide dropped off 3.3%. As 2005 came to a close, 846,982 properties were in some stage of foreclosure and the market continued to experience substantial slow downs throughout 2006. Foreclosures were up 42% in 2006 in comparison to 2005, prices were down, there was an overwhelming inventory of housing, US Home Construction Index was down was down over 40% in comparison to the year before, etc. The problems created by the housing bubble bursting continued to escalate over the next several years with foreclosures hitting a peak in 2009 at 3,957,643. More than 2.21% of all households were in some stage of foreclosure in 2009. No one was living inside the housing bubble anymore.

This drastic halt to the real estate industry’s seemingly “healthy” housing market resulted in financial crisis for many Americans and American families. In a chain reaction that anyone could predict, the number of bankruptcy filings escalated right along with the number of families struggling not to lose their homes to foreclosure. Some experts suggest that the American public is recovering from their financial crises quickly in comparison to the housing market itself. The housing market will gradually correct itself, but the American public is actively taking steps to correct the situation. The immediate result of the housing bubble on Americans was financial panic in many households, but a few years after the fact, bankruptcy filings are at a much lower level. Some suggest that the American public is getting smart. They’re getting out of debt (with bankruptcy or other alternative methods) and cutting up their credit cards and socking away cash. They’ve learned the lesson handed down by the recent housing bubble correction and following recession.

Others point to the difficulty in obtaining new debt immediately following the burst of the housing bubble as the reason behind the decline in individual bankruptcy filings. If people don’t have debt, they don’t need to file for bankruptcy and for a few years, it was suddenly a lot harder to get approved for any type of loan. Whatever the reason, Americans seem to be getting back on track financially.

If you need help getting back on a healthy financial road, contact Firebaugh & Andrews for your free consultation 734-722-2999

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Bankruptcy Code section 104 requires the Judicial Conference of the United States to publish the changes at least a month before they take effect. On February 4, 2022, the Judicial Conference published this year’s increase in the Federal Register. The nearly 11% increase in statutory dollar limits will affect nearly everything in bankruptcy that has a dollar limit, including

• the amount of property that a debtor may exempt from the estate,

• the maximum amount of certain “priority” claims, such as for employee wages and for deposits for certain undelivered products and services,
• the minimum aggregate claims needed to file an involuntary bankruptcy petition, and
• the aggregate debt limits used to determine which debtors qualify to file cases under chapter 13 or the relatively new “Subchapter V” of chapter 11.

Anyone who relies on specific dollar limits in the Bankruptcy Code should be sure to take notice of these changes.

Michigan has dollar limits for its own set of state-specific bankruptcy exemptions, and its dollar limits increase every three years as well. They increase on a different three-year cycle, though. They were last increased March 1, 2020, and are not set to increase again until 2023.

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It’s true that bankruptcy can give you a fresh start – and in some situations, bankruptcy is the best option. But there are a lot of things to consider before you make the decision, so ask yourself these questions before you file

1. Have I exhausted all other options?

There are a lot of things you can do to avoid bankruptcy. Make sure you consider these steps:

• Contact your lenders to see if they can work out a payment plan. Most lenders would much rather do this than have to forgive your debt completely when you file for bankruptcy.
• Sell some of your assets. You may be surprised at how much cash you can raise to pay off your debts.
• Eliminate all unnecessary expenses. Take a good, hard look at your spending. Are you spending a lot of money eating out? Do you really need that large cable tv package? Put together a budget and stick with it. Anything you don’t absolutely need may have to be cut — at least temporarily — so you can put more money toward your debt.
• Sign up for credit counseling. Before you file for any kind of bankruptcy, you have to undergo counseling from a government-approved agency. It must include a two-hour financial management course. All of this has to be completed no more than 180 days before your bankruptcy discharge.^. It’s a worthwhile process; sometimes credit counseling services can help people avoid bankruptcy altogether.

2. Do I have enough debt to justify bankruptcy?

The fallout from bankruptcy can last for years. That’s why it should be your last resort. There’s no minimum amount of debt you must have to file — what justifies bankruptcy for one person might be manageable debt for someone else.

This is why it’s vital you work with a credit counselor to see what other options you have — they can help you decide if bankruptcy is the only option left.

3. Do I have debt that bankruptcy won’t eliminate?

Bankruptcy doesn’t wipe out all kinds of debt. Some examples that can’t be eliminated by filing for bankruptcy include:

• Secured debt like car loans or a mortgage. These may be exempt from your filing depending on the type of bankruptcy you file and the terms of your mortgage agreement.
• Student loans, whether from the government, private lenders of individual universities. (There are a few exceptions to this if you can prove to the court you’ve made an effort, but the payments will cause you “undue hardship.”)
• Alimony and child support or any other legal obligations to make payments due to a divorce or civil case.
• Property liens, including on your home mortgage.

What types of debt can be eliminated by bankruptcy? Big categories include credit card debt, medical bills, business debts, personal loans and utility debt.

4. Do I make too much money to file for bankruptcy?

Your income plays a factor in what type of bankruptcy you can file for. If you want to file for Chapter 7 bankruptcy, for example, your monthly income must be less than your state’s median income. This is referred to as “passing the means test.” Check the Department of Justice website for your state’s median income.

If your income is more than the median income, you may qualify for Chapter 13. The means test for bankruptcy can be complicated and varies by state, so you’ll want to consult with a bankruptcy lawyer.

5. Am I being hounded by bill collectors?

The stress of major debt — and the incessant requests of debt collectors — can be unmanageable for many people. Once you file for either Chapter 7 or Chapter 13 bankruptcy, bill collectors have to stop contacting you. This by itself can do a lot to reduce your stress.

6. Have I talked through my options with a professional?

Bankruptcy is complicated and a major decision that can have wide-reaching effects on your life. Be sure to talk through everything with Firebaugh & Andrews for a free Consultation 734-722-2999.

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In simple terms, bankruptcy is a legal process a person can go through to clear some of the debts they’re unable to pay.

If you’re so overwhelmed by debt that bankruptcy feels like your only option, know these three things: 1) There is hope—and you will be okay. 2) There are other options—and you should try every single one before jumping into bankruptcy. 3) Bankruptcy does not define you and will not be the end.

Keep these three things in mind as you read through the rest of this article and learn the truth about bankruptcy, including a breakdown on these specific topics:

What Is Bankruptcy?

Bankruptcy is a court proceeding where you tell a judge you can’t pay your debts. The judge and court trustee look through your assets and liabilities (aka what you own and what you owe) to decide whether to discharge (or cancel) some of your debts. If the court finds that you really have no means to pay back your debt, you’ll go through the official process of declaring bankruptcy.

A Quick History of Bankruptcy

The term bankruptcy probably came from the Italian phrase banca rotta—which literally means broken bench—because in medieval days, if a merchant couldn’t pay their creditors, they could come break the merchant’s market stall (or bench).¹

Get help with your money questions. Talk to a Financial Coach today!

What about bankruptcy in America, specifically? Well, several different bankruptcy acts popped up during times of economic crisis before the Bankruptcy Act of 1898. This one said bankruptcy didn’t require the creditor’s approval and stuck around until the Bankruptcy Reform Act of 1978—which set the laws we follow today.

Now when you file for bankruptcy, no one’s coming to smash your bench (thank goodness!), but it’s still a painful experience.

What Are the Types of Bankruptcy?

There are six different types of bankruptcy: 

Chapter 13 Bankruptcy

Chapter 13 is a bankruptcy method for individuals where the court approves a plan for you to repay some or all of your debts over three to five years. You get to keep your assets and you’re given time to bring your mortgage up to date. You agree to a monthly payment plan and have to follow a strict budget monitored by the court. (There’s no privacy in bankruptcy.)

People can file for Chapter 13 bankruptcy if their unsecured debt is less than $419,275 and their secured debt is less than $1,257,850.² 

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common type for individuals. In this case, the court sells all your assets—with some exceptions—so you can pay back as much debt as possible. The remaining unpaid debt is usually erased.

You could lose your home (or the equity you’ve put into it) and your car in the process, depending on what the court decides. There’s no set amount of debt you need to qualify—the court just has to decide you don’t make enough money to pay off your debt.

Chapter 11 Bankruptcy

Usually just for businesses, Chapter 11 creates a plan for how the business will still run while paying off all their debt.

Chapter 12 Bankruptcy

Chapter 12 bankruptcy allows farmers and fishermen to get on a payment plan for their debts to avoid foreclosure on their property.

Chapter 15 Bankruptcy

International bankruptcy cases are handled in Chapter 15.

Chapter 9 Bankruptcy

Chapter 9 bankruptcy is a repayment plan for towns, cities, schools and the like to pay back their debt.

P.S. For specific information about bankruptcy laws in your area, visit the United States Courts website. There you’ll find info on the process and where to find help in your area. There’s a bankruptcy court for each judicial district in the United States—90 districts in all.

How Does Bankruptcy Work

You’ll see this theme throughout this entire article: bankruptcy sucks. If you can avoid it, avoid it. (See the What Are Alternatives for Declaring Bankruptcy section for practical ways to do just that.) But if you do everything possible to avoid bankruptcy and still come to that point, here’s a quick overview of how to file for bankruptcy and the paperwork you’ll need to get ready.

How to File for Bankruptcy

1. Figure out which type of bankruptcy to file for.
2. Gather and organize the necessary documents (listed below).
3. Take a credit counseling course.
4. Fill out your bankruptcy paperwork.
5. Make sure you have your fees (for an attorney and filing).
6. Print your bankruptcy paperwork.
7. File your bankruptcy paperwork.
8. Send all the necessary documents to your bankruptcy trustee (the person appointed by the court to handle your case).
9. Meet with this trustee in a 341 meeting (or a meeting of the creditors).
10. Take a debtor education course.
11. Finish the bankruptcy process (which varies based on the type of bankruptcy you filed for).
12. Rebuild your life and know you can rise from this situation!

Yeah—it’s going to feel like you’re digging up and showing off every bit of private information you’ve ever had. Really, the only upside is they don’t ask for that awkward eighth grade yearbook photo.

What Documents Do You Need to File for Bankruptcy?

There’s a heck of a lot of paperwork and forms and documents involved in bankruptcy, but let’s talk about what you need to gather up at the start:

• Tax returns for the past two years (for Chapter 7) or four years (for Chapter 13)
• Income documents (such as pay stubs from the past six months, your past two W-2s, and proof of any extra income sources like rental properties or Social Security)
• Mortgage information (like an appraisal, mortgage payment statements, and maybe the deed of trust and proof of home insurance)
• Vehicle information (such as proof of your vehicle’s value, any car loan statements, and maybe a copy of your registration and proof of car insurance)
• Retirement information
• Bank account statements
• Identification (meaning your valid photo ID and proof of your Social Security number)
• Other documentation showing any other debts or expenses, like alimony or child support

Yes, that’s a lot. Bankruptcy is not an easy out! Also, your particular state or court system may require more. Get ready to do a lot of hunting and have a lot of patience here.

What Happens if You Declare Bankruptcy?

If you declare bankruptcy, creditors have to stop any effort to collect money from you, at least temporarily. Most creditors can’t write, call or sue you after you’ve filed. But even if you declare bankruptcy, the courts can require you to pay back certain debts. Each bankruptcy case is unique, and only a court can decide the details of your own bankruptcy.

Let’s talk for a moment about what bankruptcy does and doesn’t cover:

What Does Bankruptcy Cover?

Bankruptcy can stop foreclosure on your home, repossession of property, or garnishment of your wages. (Garnishment is when the court orders part of your paycheck to be sent directly to your creditor—without you ever seeing the money). Bankruptcy cancels many—but not all—of your debts.

What Is Not Covered by Bankruptcy?

• Student loans
• Government debts like taxes, fines or penalties
• Child support and alimony
• Expensive items purchased right before filing bankruptcy, like cars, boats or jewelry

What Are the Consequences of Declaring Bankruptcy?

Let’s not sugarcoat it: Bankruptcy takes a huge emotional toll on a person. It ranks up there with divorce, loss of a loved one, and business failure. Beyond the emotional impact, here are other effects of declaring bankruptcy:

Your bankruptcy becomes public domain.

This means your name and other personal information will appear in court records for the public to access. That’s right . . . Potential employers, banks, clients and businesses can access the details of your bankruptcy.

Filing bankruptcy is expensive.

Filing fees for Chapter 13 bankruptcy will cost around $310 plus attorney fees, which can be anywhere from $3,000 to $3,000. For a Chapter 7 bankruptcy, you’ll shell out $335 for filing fees and $1,500 to $3,000 for an attorney.³

Buying a home can be more complicated after a bankruptcy.

Unless you pay cash for a home, it could take one to four years before you qualify for a mortgage loan.⁴

Bankruptcy affects your credit score.

We aren’t pro-credit scores, but it’s important for you to know a bankruptcy dings your FICO. Hard. And that ding lingers. Chapter 13 bankruptcies stay on your credit report for about seven years, and Chapter 7 stays on there for 10 years.

Bankruptcy doesn’t clear all debts.

We’ve touched on this some, but declaring bankruptcy doesn’t make all your problems go away—and it doesn’t even make all your debt go away. Most student loans, alimony, child support, any reaffirmed debt, unpaid taxes, government debts or court fines aren’t cleared in a bankruptcy.

Should You Declare Bankruptcy?

Listen. We’ve said it before, and we’ll say it again: Bankruptcy should be your very last option. Check out all the alternatives (aka how to avoid bankruptcy) below. Try each and every one. If nothing works, and you’re still so overwhelmingly underwater that you simply cannot swim—then and only then do you declare bankruptcy.

What Are Alternatives to Filing for Bankruptcy

Before you even start gathering up that giant pile of documents you need to file for bankruptcy, go through this list of alternatives:

Get on a budget.

Budgeting may seem intimidating, but it’s just a plan for your money. And if you’re planning to get out of debt and avoid bankruptcy, you can’t do it without a budget. You need to see exactly what money you have coming in and where all of it is going.

Once you see what your money is doing, you can start telling it what you want it to do. And what you want is to have more money freed up to pay off that debt.

That means cutting extras and spending less money. That means learning tips on how to save money on everything. That means being super intentional with every single dollar you make and spend.

Yes, it’s work. But it could be the exact thing that keeps you from bankruptcy. Don’t. Skip. This.

Cover your Four Walls.

When you’re making a budget that will work for you right now, where do you start? What’s the main stuff you need to focus on covering? Start with what we call your Four Walls: food, utilities, shelter and transportation. These are the main essentials.

Keep everyone fed, the lights on, a roof over your heads, and gas in the car to get to work. If these Four Walls are only things you can pay for while you’re getting out of debt, that’s called survival mode, and that may be what you need to jump into right now.

Sell. Everything. You. Can.

Here’s the deal: If you declare bankruptcy, you’re probably going to lose some of your stuff anyway. So right now, sell everything you can. Be the one in charge of what goes and what happens to the money coming in from those sales. Put all of that money straight toward your debt.

Talk to a financial coach.

You don’t have to walk this alone. Read that again: You don’t have to walk this alone. Get with a financial coach and talk about your situation. They aren’t here to judge—they’re here to help.

A financial coach can help you figure out a personalized plan of action for your specific situation. And yes, talking about money can be terrifying, but if you declare bankruptcy, your financial privacy will be out the window immediately. Opening up to a trustworthy financial coach now can help you avoid having to open up to a whole courtroom of people in bankruptcy.

Create extra income.

Another way to avoid bankruptcy is to bring in more money. Get yourself a side hustle. There are plenty of ways to work extra hours that fit into your schedule, and also plenty of work-from-home jobs that will keep you from spending extra drive time or gas money.

If that is still not enough give Firebaugh & Andrews a call for your free consultation 734-722-2999

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If you’re planning to file for bankruptcy, it might make sense to do so as soon as possible. For instance, filing for bankruptcy can stop a foreclosure, repossession, or wage garnishment; help you keep more property and; let you discharge debt. Below are the seven reasons that people benefit from filing for bankruptcy sooner rather than later.

Keep in mind that it’s common to have competing issues—reasons to file soon and reasons to wait. You’ll find list of situations that might cause you to consider delaying your bankruptcy filing in Top 10 Reasons to Delay Filing for Bankruptcy.

1. The Bank Is Foreclosing on Your Home

If you’re in foreclosure, you can stop it by filing for bankruptcy. Once filed, the automatic stay prohibits lenders and creditors from continuing collection actions against you, including foreclosure proceedings. Keep in mind that Chapter 7 doesn’t have a mechanism to help you stay in your home, and the lender can file a motion to lift the stay, so the relief will be temporary. Only in Chapter 13 can you catch up on mortgage payments and keep your house.

One of Chapter 7’s benefits is that if you file before the foreclosure ends, the bankruptcy will wipe out the entire mortgage debt. You won’t get stuck owing the difference between the auction price and your balance (called a deficiency). Because even if your lender forgives the deficiency after foreclosure, you’ll likely owe income taxes on the forgiven amount. Filing for bankruptcy before the foreclosure can help avoid these problems. Find out more in Should I File for Bankruptcy Before or After Foreclosure?

2. Your Lender Wants to Repossess Your Car

Bankruptcy’s automatic stay also puts an immediate stop to any efforts by your lender to repossess your car. In Chapter 13, you can catch up by including back payments in your plan. In both chapters, you might be able to get your car back if the lender repossessed it recently. Talk to a local bankruptcy lawyer. If you’d like to learn more, read Can the Lender Repossess My Car During Chapter 7 Bankruptcy and Car Repossession and Bankruptcy.

3. You’ve Moved to a State With Less Favorable Exemptions

You don’t have to give up all of your property in bankruptcy. Each state has a list of bankruptcy exemptions that you can use to keep the property you’ll need to work and live. If you’ve moved to a different state, and the new exemption laws won’t protect as much as those in the old state, you’ll want to file for bankruptcy soon. The available state exemptions will depend on your “domicile.” In most cases, you’ll use your old state’s exemptions when you’ve moved recently.

4. Your Landlord Is Evicting You

A bankruptcy filing will put a stop to most evictions, but not for long. And if the landlord already obtained a judgment for possession (an eviction order from the court), bankruptcy won’t help at all. For details, see Will Bankruptcy Prevent an Eviction?

5. You Want to Stop a Lawsuit

If someone is suing you for medical debt, credit card debt, car accident damages, or a breach of contract, filing for bankruptcy will stop the suit. It makes no sense to pay to defend these lawsuits if you can have the debt discharged. But it is important to note that a bankruptcy will not stop all lawsuits.

6. You Started a Higher Paying Job

Qualifying for Chapter 7 bankruptcy means passing the means test. Your income is essential—the means test looks at your average earnings over the six months before you file. The higher your income, the less likely you’ll pass the means test. If you recently started a higher-paying job, your means test average income increases every month that you wait to file. Filing for bankruptcy sooner rather than later may help you pass the means test. However, keep in mind that’s not all that the trustee and court will consider. If your actual income is higher than what you need to cover monthly expenses, the trustee will recommend converting your case to Chapter 13.

7. You Expect to Receive Property Soon

You can usually keep property in which you obtain an ownership interest after filing for bankruptcy. However, exceptions exist. For instance, you’ll need to report inheritances and lottery winnings up to 180 days after you file. So if you expect to receive property soon, it might be a good idea to file before you become entitled to it—but speak with a local bankruptcy lawyer first.

Call Firebaugh & Andrews for a free consultation 734-722-2999

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The COVID-19 pandemic and the subsequent economic impact has already affected millions of Americans and thousands of renters in Michigan are at risk of homelessness due to inability to pay their rent. Fortunately, tenants are temporarily getting protection from eviction for non-payment of rent under various emergency government measures.

Federal CDC Eviction Moratorium

Because of the unemployment and financial struggles due to the pandemic, there was a statewide ban on housing evictions in Michigan that came into effect on April 1^st 2020. This moratorium on evictions has been extended five times over the course of six months but ends July 31st.

The last Michigan eviction moratorium, which expired on September 1^st, has been extended to December 31^st under the Centers for Disease Control and Prevention (CDC) recent order. The 2^nd stimulus package extends this moratorium until January 31, 2020. The CDC federal moratorium puts a temporary ban on landlords taking action against tenants for non-payment of rent and other utility service charges and was change to July 31st 2021.

So Michigan families who can’t pay rent due to Covid-19 related financial hardships such as layoffs, loss of household income or huge out-of-pocket medical expenses can continue to get protections under this CDC eviction moratorium.

Criteria: Tenants who are seeking relief under the federal moratorium must meet the criteria outlined by the CDC. To qualify for protection, the tenant:

• Must expect to earn no more than $99,000 or $198,000 if filing a joint return in 2020
• Has received an economic stimulus check under the CARES Act@
• Was not required to report any income to the IRS in 2019
• Has sought all available government assistance to make their rental payments

Limitations of Eviction Moratorium

The moratorium looks like a panacea for all problems but this is not true. The most important thing about the eviction moratoriums is that they are temporary and do not forgive or reduce rent payments. This means, unfortunately, the moratorium will not help renters pay rent but it just delays the threat of eviction and there are some loopholes in it that put certain renters at risk of removal.

This federal protection is quickly disappearing and, it is already expired. You are already several months behind on rent and continue to accumulate debt during this period and when this temporary halt of evictions end on December 31, 2020, your landlord may demand payments in full that you’re not made prior to and during the temporary halt.

Without the extension of eviction ban and other federal financial support, many renters could be facing homelessness when the eviction moratorium expires on July 31 (now extended by one more month under the new coronavirus stimulus deal, lasting through January 31, 2021). On top of that, most landlords will not even consider a tenant with a previous eviction record.

Housing is undeniably a basic human necessity and those who are evicted often lose their jobs, possessions, community connections, and even health. If you are depending on the anti-eviction provisions of the CARES Act to protect you from being evicted from where you’re living, then it would make more sense to consider filing for bankruptcy.

Using Chapter 7 Bankruptcy to Stop an Eviction for Rent Arrears

Filing Chapter 7 bankruptcy can put an automatic stay on eviction actions and also prevent the landlord from collecting any past due rent that you owe. You can receive a discharge of past-due rents by filing a Chapter 7 bankruptcy, but you can still be evicted. So if you plan on moving but only looking to get relief from the past due rent you owe, then filing Chapter 7 is the best option for you.

In general, the automatic stay can provide relief to tenants by preventing the landlords from beginning or continuing with eviction proceedings. But in 2005, the bankruptcy law was revised that give landlords more power to evict tenants who file for bankruptcy, despite the automatic stay. There are two situations where bankruptcy will not stop an eviction:

1. The landlord obtains a judgment of possession of the property before the tenant filed for bankruptcy
2. The landlord claims that the tenant is endangering the property or illegally using drugs

Waiting too long to file for bankruptcy can limit your power to retain control over the situation and comes with the consequence of losing your home. So in order to stop an eviction through bankruptcy, it is critical for you to act immediately by filing your case before the landlord gets an order of possession. Please call Firebaugh & Andrews for a free consultation 734-722-2999

The post Chapter 7 Bankruptcy and the Current Eviction Moratorium first appeared on Michigan Bankruptcy Facts 734-722-2999.

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A New Albany, Ohio, music school offering piano, guitar and violin lessons racked up under nearly $1 million in loans and $35,000 in credit card debt.

A fine-dining restaurant in Providence, R.I., received more than $450,000 in federal small-business funds to help pay workers but still had to close its doors.

A nonprofit overseeing the Kit Carson Home and Museum in Taos, N.M., welcomes visitors to learn about the famous frontiersman but listed just $17,000 in assets even after every bone-handled knife, buffalo hide apron and flintlock musket had been tallied.

Nearly a year since coronavirus-related shutdowns began affecting large swaths of the American economy, more businesses are filing for bankruptcy as Chapter 11 filings were up nearly 20 percent in 2020 compared with the previous year, court records show.

Data on a subset of businesses ― those registered as corporations ― shows that some sectors are faring much worse than others, with restaurants, retailers, entertainment companies, real estate firms and oil and gas ventures filing for protection in far greater numbers than in previous years, according to New Generation Research.

Bankruptcies filed by entertainment companies in 2020 nearly quadrupled, and filings nearly tripled for oil and gas companies, doubled for computer and software companies and were up 50 percent or more for restaurant owners, real estate companies and retailers, compared with 2019, data from the research firm shows. Among those industries most affected, there were 5,236 Chapter 11 filings in 2019 but 6,917 last year, a tally at least 30 percent higher than any of the previous four years.

Economists are predicting strong economic growth this year overall. But the bankruptcy data show that despite $3.7 trillionin federal stimulus spending to combat the recession triggered by the pandemic, and another $1.9 trillion being proposed by President Biden, businesses in certain industries have become particularly vulnerable and may take years to recover enough to pay their bills. Others will not recover at all.

Other sectors have so far not fared as badly as one might expect, as only 77 hotel or gaming companies filed for protection in 2020, down from 92 in 2019 ― a year when the tourism industry thrived.https://3ac7c9fe1e80353cf95a10043cb8e49b.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Because bankruptcy filings lag other signals of economic distress, experts say the worst may be yet to come. Bankruptcies stemming from the 2007 financial crisis didn’t peak until 2010.

“Bankruptcies don’t cause damage to the economy,” said Ed Flynn, a consultant to the American Bankruptcy Institute. “The damage has already been occurred when the bankruptcy is filed. Higher bankruptcies is more a symptom of economic harm than the cause.”

Michigan-based BarFly Ventures operated three small restaurant chains ― HopCat, Stella’s Lounge and Grand Rapids Brewing ― and had more than a dozen restaurants throughout Michigan and down to Florida at its peak. Although BarFly received $6.6 million in Paycheck Protection Program funds from the Small Business Administration, the company was forced to lay off staff and close some locations permanently, according to filings. It filed for bankruptcy in June.

“BarFly has faced a number of challenges in recent years, including increased industry competition and craft beer saturation,” founder Mark Sellers announced. “However, we were meeting these challenges, and operationally the business was sound until the recent global pandemic pushed us into an unforeseen economic crisis and a 100 percent drop in revenue for almost three months.”

BarFly owed more than $1.7 million to a food provider, according to its bankruptcy filing. Sellers said he hoped the move would “allow us to emerge as a financially stronger company.” In October, BarFly announced it was being purchased by two investment firms.

Restaurants have been one of the hardest-hit sectors on almost every measure during the pandemic, and experts say the worst of the fallout is likely still to come.

If your business needs help reorganizing call us today for your free consultation. 734-722-2999

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