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

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The following is a brief description of the relief afforded to individuals and businesses through Chapter 11, for more information please call Firebaugh & Andrews for a few evaluation at 734-722-2999

Chapter 11 Overview

Filing a Chapter 11 petition grants a debtor what is known as an automatic stay from the enforcement actions of creditors. This precludes creditors from continuing collection efforts, from bringing a lawsuit, or from filing liens against property or foreclosing on property.

In Chapter 11, a debtor generally remains in control of their estate. A trustee may be appointed for cause (i.e., fraud, dishonesty, incompetence or gross mismanagement) or if such appointment is in the best interest of creditors; however, this relief is relatively rare. A Chapter 11 debtor-in-possession generally has the same rights as a trustee would have if appointed, thus any reference to rights or authority of a debtor would apply to a trustee, if appointed, as well.

Exclusive Time Periods

A Chapter 11 debtor is granted the exclusive right to file a plan of reorganization for a period of 120 days and to solicit a plan of reorganization for a period of 180 days. A debtor can seek an extension of these “exclusive periods” for cause. Otherwise, once an exclusive period lapses, any creditor or party in interest can file a plan of reorganization for the debtor.

Similarly, if a creditor or party in interest can show that a debtor is mismanaging the estate, not negotiating in good faith with creditors or using the exclusive period as leverage in negotiation with creditors, they can seek to terminate exclusivity to allow non-debtors to file a competing plan. Competing plans are rare; however, the threat of a competing plan is often sufficient to keep negotiations between a debtor and its creditors active.

Committee of Unsecured Creditors

Another tool available to balance creditors’ powers of negotiation is an official committee of unsecured creditors. The purpose is similar to that of a class action lawsuit – while each individual creditor may not have a large enough claim to justify retaining counsel, aggregate creditors’ claims can be quite large and their collective voice could benefit from legal representation. The creditors’ committee is made up of three or more volunteering unsecured creditors selected by the United States Trustee. The creditors’ committee can retain legal counsel and financial advisors to assist in the case, with the cost of such professionals carried by the debtor.

A creditors’ committee is not formed in every case and is usually limited to large, complex or highly contested Chapter 11 cases.

The Reorganization Plan

A Chapter 11 plan of reorganization provides debtors with important tools for rearranging financial affairs. For example, a plan may allow a debtor to reject certain contracts or leases with a cap on damages. This is helpful where a debtor has signed an expensive, long-term contract that is no longer beneficial.

A debtor may also refinance existing loans including increasing the time in which it must be repaid (i.e., stretching a two-year loan to five years), decreasing the interest rate if interest rates have declined since the loan was entered into, or changing/removing other arduous terms. Through Chapter 11, as with other bankruptcy chapters, a debtor can also sell an asset free and clear of all liens either through a plan or through what is a called a 363 sale. The ability to sell an asset free and clear of liens can garner a greater sale price as purchasers are assured that the property is unencumbered and the purchaser is subject to less liability.

Regardless of who files a plan of reorganization, certain creditors are entitled to vote to approve or disapprove a plan. Only those creditors that are determined to be partially impaired (e.g., reduced payments or payments over time) are entitled to vote on a plan. Creditors that are unimpaired are deemed to accept the plan and creditors that are fully impaired (i.e., will not recover) are deemed to reject the plan. However, even if they are not allowed to vote on a plan, a creditor still has the right to object to its treatment under the plan. In order for a plan to be accepted, two-thirds of creditors in number and fifty percent of creditors in dollars must vote in favor of the plan.

A Chapter 11 debtor can cramdown a plan over the negative vote of creditors in certain circumstances. Even if creditors vote to accept a plan, the bankruptcy court will review the plan and ensure that it meets statutory requirements before the plan can be confirmed. If a debtor is unable to get a plan of reorganization confirmed, the case may be converted to a Chapter 7 filing or dismissed. After a plan is confirmed, the debtor’s bankruptcy is essentially over. However, the bankruptcy court generally retains jurisdiction over the case at least until the last plan payment is made.

Chapter 11 for Individuals

Given the complexity and cost of Chapter 11, it is most often used by businesses. On the other hand, Chapter 11 may be the only option available to an individual debtor with income greater than that allowed by the Chapter 7 means test, and secured debt in excess of that allowed by Chapter 13. This is often the case where an individual owns large amounts of real property, but does not have sufficient liquidity to pay his or her debts as they come due.

The major benefit of Chapter 11 for individuals is the ability to keep assets beyond just the statutory exemptions available under Chapter 7 and Chapter 13. Given that Chapter 11 individual cases are relatively infrequent and the language of the chapter is better applied to corporations, the law applied to Chapter 11 consumer cases has been largely unsettled. If you are considering an individual Chapter 11 you would be best served to give us a call for a free consultation at 734-722-2999 Firebaugh & Andrews

The post What is Michigan chapter 11, and who may qualify? first appeared on Michigan Bankruptcy Facts 734-722-2999.

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Prevent Foreclosure, Repossessions And Garnishments In Michigan

When you file bankruptcy, you are protected by the “automatic stay.” The automatic stay requires creditors to put an immediate stop to all debt collection efforts. The following are examples of creditor actions that can be stopped when you file bankruptcy:

• Home foreclosure: Filing bankruptcy will stop the foreclosure and give you time to decide whether to keep the home or give it up.
• Auto repossession: Filing bankruptcy will stop a repossession. As long as the car has not been sold, you can get it back.
• Harassing phone calls: Once you file bankruptcy, creditors cannot call you or your employer.
• Lawsuit judgments: Filing bankruptcy puts an immediate stop to collection of lawsuit judgments.
• Wage garnishments: Filing bankruptcy will stop the garnishment. If you act soon enough, it may allow you to get garnished wages back.
• Bank account garnishments: Filing bankruptcy will stop the garnishment. If you act soon enough, it may allow you to get your money back.

Call Firebaugh and Andrews we handle emergency bankruptcy filings in Michigan, call us today for your free consultation. 734-722-2999

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This means creditors must stop collection efforts.

The Stay is Designed to STOP Debt Collectors

The automatic stay in bankruptcy was designed to:

• HALT foreclosure
• STOP repossession
• SILENCE creditors
• STOP many lawsuits & wage garnishments

The U.S. Bankruptcy Code protects all bankruptcy filers by force of the automatic stay provision. With very limited exceptions, this federal court order prohibits all collection activity after filing bankruptcy.

The automatic stay is designed to stop any lawsuit filed against you and almost any other action against you, your property and your paycheck. Any creditor who tries to illegally collect on a debt can be fined by the court and forced to give back any property or money taken.

How Bankruptcy is Designed to Protect Assets

The automatic stay is a court order that usually takes effect right after filing for bankruptcy. This stay was designed to STOP:

• Lawsuits
• Foreclosure
• Repossession
• Wage garnishment
• Phone calls from creditors
• Letters from creditors

If you have serious debt, you may need serious protection from your creditors.

Bankruptcy can provide protection from creditors. Once you file bankruptcy, creditors are legally prevented from contacting you about the debts included in your filings. Better yet, when debt is eliminated through a bankruptcy filing, creditors can never come back and demand payment on that debt. In fact, creditors could face legal action if they try to collect on debts after your file bankruptcy. This kind of protection from creditors can be a big relief when you’ve been battling with bill collectors.

Collection agencies are notorious for using threatening and harassing tactics, and even breaking the law. In the past, collection agencies have threatened people with violence, deportation and lawsuits – even when doing so is illegal.

This is one reason why so many people turn to bankruptcy for protection. They need safety and a shield against this type of treatment. No one deserves to be threatened and harassed.

How Long does the Automatic Stay Last?

The automatic stay is invoked when filing both Chapter 13 and Chapter 7 bankruptcy.

In the case of Chapter 13 bankruptcy, the automatic stay provision may stay in effect for a duration of of your case, generally 3 to 5 years, or until it is lifted by the court, while you repay your debts through the bankruptcy court at a rate based on what you can afford.

In Chapter 7 bankruptcy, the stay typically lasts a few month while your case works through the court, and creditors are prohibited from contacting you once the debts are discharged at the end of the case.

If you need help putting an end to creditor harassment, wage garnishment, lawsuits and foreclosure, speak with Firebaugh & Andrews today for Free Evaluation 734-722-2999

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