Chapter 13 Facts

Can you keep your tax refund in Chapter 13 Bankruptcy?

Whether you can keep your tax refund in Chapter 13 bankruptcy depends on several factors. As a general rule you must turn over your federal tax refunds to your chapter 13 bankruptcy plan every year you are in the bankruptcy. You may always keep your state or city refund.

If your bankruptcy plan proposes to pay all your creditors in full, you may keep your federal refund. Even if your bankruptcy plan proposes to pay less than 100% back to your creditors it is still possible to retain all or a some of your federal tax refund. This can be accomplished by either pro-rating your refund and including it as part of your monthly income, or to file a motion with the Judge to excuse your refund.

If you have proof of some extraordinary expenses (large home repair, large car repair, medical expense, etc.) you may be able to keep your refund or part of it to help pay for those expenses. It is a good idea before filing bankruptcy to alter your withholdings for federal taxes to get as close as possible to tax neutral, meaning you do not owe any taxes at the end of the year but you get little or no refund

If you have any questions call Firebaugh & Andrews for your free consultation 734-722-2999

Advantages of bankruptcy, Chapter 13 Facts, Chapter 7 Facts

Will chapter 13 be better for my credit score then filing for chapter 11 bankruptcy?

Chapter 7 and Chapter 13 bankruptcy will stay on your credit report for the same amount of time; about ten years. Although they both have the same effect on your credit score, a particular creditor reviewing your report to decide whether to lend you money might view one chapter more favorably than the other. In particular, a creditor might be more willing to lend to you if you filed for Chapter 13 rather than Chapter 7.

Advantages of bankruptcy, Chapter 13 Facts

Should I File for Chapter 7 or Chapter 13 If I Want to Keep My Home?

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It’s possible to keep a home when you file for bankruptcy, but the circumstances must be right. You’ll need to be sure that you meet the requirements of the chapter you file. For instance, Chapter 7 filers must be current on payments and protect all home equity with a bankruptcy exemption. By contrast, Chapter 13 filers can catch up on missed mortgage payments and keep the home. Read on to learn about:

  • protecting home equity in Chapter 7 and 13
  • keeping a home in Chapter 7
  • catching up on past-due payments in Chapter 13, and
  • removing liens and lowering mortgage payments in Chapter 13.

Protecting Your Home Equity in Chapter 7 or Chapter 13 Bankruptcy

Start by determining whether you can protect all of your home equity in bankruptcy. You must complete this critical step in both Chapter 7 and Chapter 13 bankruptcy.

In both bankruptcy chapters, you protect an asset with a bankruptcy exemption. Each state has a list of exemptions, so the property type and amount of equity you can protect using state exemptions varies widely.

Only a few states let you keep all of your home equity when you file bankruptcy. Most states have a much lower “homestead exemption.” Here’s how the homestead exemption works in Chapter 7 and 13.

  • Chapter 7 case. Suppose the exemption isn’t enough to cover the entire amount of your equity. In that case, the Chapter 7 court-appointed trustee will sell it and use the proceeds above your exemption amount to pay off some of your unsecured debt, like credit cards and medical bills.
  • Chapter 13 case. Chapter 13 bankruptcy works differently. You won’t be forced to give up any property. Instead, you’ll pay for the nonexempt portion of the equity in your plan. Of course, if you have significant nonexempt equity, this could get expensive. You’ll have to demonstrate that you have enough income to pay all amounts required in your plan.

Example. You have $50,000 in equity in your house, but the maximum amount you can exempt is $30,000. You’ll have to structure your Chapter 13 payment plan so that your unsecured creditors will receive at least $20,000 over the life of the plan. That amount is in addition to any other debts your plan payment must cover, like mortgage arrearages and car payments.

Find out more about what happens to your home and mortgage in Chapter 13 bankruptcy.

But being able to protect or pay for your home equity isn’t enough. You’ll have other requirements you must meet, as well.

Keeping Your Home in Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is often more attractive because it’s simpler and gets you on the road to financial stability sooner because you don’t pay into a three- to five-year repayment plan.

You’ll be able to keep your house as long as you meet the following criteria:

  • You’re current on your house payments.
  • You can protect all of your home equity with a bankruptcy exemption (see above).
  • You’ll be able to continue making your payments in the future.

Chapter 7 bankruptcy does have some limits as a tool for managing mortgage debt, however. It won’t help you catch up on past-due payments, and it might be challenging to protect the house if you have a lot of equity in it. The bankruptcy trustee will sell it and use the nonexempt equity to pay other creditors, such as back taxes, credit card balances, and personal loans.

Chapter 13 bankruptcy can be a better choice to address both those issues so you can keep the home. Chapter 13 might also allow you to get rid of second or third mortgages.

Chapter 13 Bankruptcy and Past-Due Mortgage Payments

If you’re behind on your mortgage payments and you want to keep the house, Chapter 13 bankruptcy provides a mechanism for helping you get caught up—something that Chapter 7 bankruptcy cannot do.

  • Propose a repayment plan. In Chapter 13 bankruptcy, you propose a repayment plan that will allow you to pay your creditors over three to five years. You can treat your mortgage arrearage as a separate debt and add it to your payment plan.
  • Show you have sufficient income. Using the Chapter 13 plan to catch up on your arrearages will only work if you have the income to make both your regular monthly mortgage payment and your plan payment while you’re in bankruptcy.

Once you’re in Chapter 13, the mortgage holder can’t foreclose if you’re paying your house and plan payments on time and keeping to your mortgage terms, like ensuring that you have homeowners insurance in place.

Using Chapter 13 Bankruptcy to Remove Junior Liens

If you have a second or another junior lien on your homestead, you might be able to get rid of it through a process called “lien stripping.” Lien stripping is available only in a Chapter 13 case and only when your property is worth less than the primary loan balance.

To strip the lien, you’ll have to file a motion in the bankruptcy court and present evidence on the property’s value and the mortgage loan balances. If the court voids the junior lien, the debt you owe to that creditor will be treated in the Chapter 13 case as if it were unsecured. Any remaining balance will get wiped out with other qualifying unsecured debt at the end of the case.

Learn about lien stripping and getting rid of second mortgages in Chapter 13 bankruptcy. Call Firebaugh & Andrews for a free consultation 734-722-2999

Chapter 13 Facts

How long does chapter 13 repayment plans last?

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Payment plans must be between 36 -60 months.  The number of months starts to run the day your case is confirmed, not the day your case is filed.  The length of your plan can depend on many factors. Your level of income may dictate whether you are required to be in the longer 60 month plan. However, even if you qualify for a 36 month plan you may wish to extend it out longer in order to help keep your plan payments down.

In most cases the Trustee can extend your plan 6 months beyond its expiration date in order to make sure you have a fulfilled all the requirements of the plan. However, be aware that in the Eastern District of Michigan, Judge Tucker has ruled that 60 months is the absolute maximum number of months and that plans cannot be extended beyond 60 months for any reason. If you have a case before Judge Tucker it is important to make sure you have all requirements of the plan completed in the 60 months as your case can be dismissed at the end of the 60 months if not all the requirements of the case have been met.  Make sure you meet with your bankruptcy attorney well in advance of your case closing for a full review to make sure you case is set to complete on time.  This is a good idea no matter which Judge is handling your case.  You do not want to get to the end of your case and be surprised by a requirement you have failed to fulfill.

If you have questions about filing for bankruptcy in Michigan, contact Firebaugh & Andrews. Call for your free consultation 734-722-2999

Bankruptcy, Chapter 13 Facts, Chapter 7 Facts, Personal Bankruptcy, What you need to know when filing Bankruptcy

Checklist: Documents To Show To Your Bankruptcy Attorney

Bankruptcy is not a simple matter with minor consequences. Rather, it may involve complex dealings with bankruptcy court and creditors. It could also have a major impact on your daily life. Filing for bankruptcy can affect your credit and property. Naturally, this is a stressful situation that you never envision yourself being in. The situation can be made easier by making the proper choices such as hiring a competent bankruptcy attorney and collecting and organizing your financial data.

When faced with credit problems and potential bankruptcy, hiring an attorney might be the answer to getting your financial life back on track. If you’re planning to contact an attorney, use the checklist below to gather the documents that the attorney will need to see to provide you with the best advice and representation. Oftentimes, people do not know where to start and what to do. This checklist will be a useful proactive tool so you can begin collecting and organizing the proper paperwork.

Financial Records

Your financial records are some of the first documents you should collect. These records will help determine which type of bankruptcy is best suited for you. For example, your financial documents can show you have regular income, meaning your best fit may be Chapter 13 bankruptcy. This may have huge implications because Chapter 13 will allow you to keep possession of your property and pay your debts over time.

  • Most recent bank statements
  • Most recent bills from every creditor
  • Most recent payment coupons for vehicles (lease or purchase), real estate, and student loans
  • Bills or invoices for purchases in the last year
  • Receipts

Legal Records

Any legal history or pending litigation involving you is information you’ll want to disclose to your attorney. Previous judgments against you show debts that will factor in to determining which bankruptcy is right according to your financial situation. In addition, any pending litigation or current court order will determine how much you can afford to pay your creditors at this time.

  • Files from previous litigation, including especially any judgments that have been entered against you
  • Files from previous attorneys
  • Any divorce decree or other court order that requires you to pay child support or maintenance

Additional Documents

The following list below is a combination of assets you own and verification of your income. A proper, thorough organization of your assets is extremely important to show you have a set income level. This income determination can be essential in proving you can repay your debts over a period of time or in proving a lack of income.

  • Canceled Checks for any expense you cannot otherwise document
  • ALL your correspondence with or regarding creditors, especially threat letter
  • ALL insurance policies
  • Tax returns for the last three years
  • Vehicle titles
  • Your lease or mortgage
  • Any promissory notes you have signed
  • Other documents relating to debts you owe other people
  • Any proof that anyone owes you money
  • Any lawsuits with which you have been served

Firebaugh & Andrews will make sure all your questions are answered, call today for a free consultation 734-722-2999

 

Bankruptcy, Bankruptcy Questions, Chapter 13 Facts, Chapter 7 Facts

Chapter 7 Or Chapter 13 Bankruptcy

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A New Beginning With Bankruptcy – Chapter 7 Bankruptcy

No one ever expects it to happen but everything gets out of control and you are in debt far over your income. No one wants to think about filing bankruptcy but sometimes you just don’t have a choice. Chapter 7 bankruptcy allows you to emerge from a difficult experience and start all over. Chapter 7 bankruptcy is when a debtor’s non-exempt assets are sold and the money is distributed to his creditors. If a debtor has few assets, he or she can exempt the property and obtain a fresh start and keep his or her assets.

Chapter 7 is the most common type of bankruptcy. This type of filing is most common, claiming about 65% of all bankruptcy filings. As long as the creditors have no objections, the debtor can be free of most debt within a few months.

A debtor will not lose their house or car with loans if they agree to continue to pay for these items and there is little equity. Many people are unfamiliar with this information and won’t even check into Chapter 7 bankruptcy. The only drawback to Chapter 7 is that you are unable to file bankruptcy within eight years after a previous bankruptcy discharge.

How do you file a Chapter 7 bankruptcy claim? The easiest answer to this is to contact Firebaugh & Andrews PLLC at 734-722-2999. You will speak directly with either attorney Sam Firebaugh or Roberta Andrews. They will ask you questions to make sure sure qualify. It is very important to answer all questions truthfully.

No one ever thinks they could possibly have to file bankruptcy. It is comforting to know that if things get bad enough you do have an option. It is also reassuring to know that you don’t have to lose your house or car when trying to make a new beginning.

A Way To Ease The Pain – Chapter 13 Bankruptcy

The debts have been mounting up and you are getting farther and farther behind in paying them. You want to pay them but you are not sure exactly how to get that done. Chapter 13 of the bankruptcy code allows you to do exactly that. You can pay your bills back at a lower interest rate or no interest rate at all. A Chapter 13 bankruptcy allows you to keep all of your assets. This type of bankruptcy is for those who have a regular income and can afford to pay something but not as much as they are paying out now. Chapter 13 bankruptcy gives you three to five years to finish your payment plan and discharge most of your debts even if they only receive a fraction of what you owed. During these five years, Firebaugh & Andrews, PLLC will oversee the process for both you.

A Chapter 13 bankruptcy allows the debtor to keep their property. The Court allows you to will set up a Plan of repayment based upon what you can afford to pay. There will be a written plan drawn up to protect you from collection while you are in the payment Plan. Once this plan has been written and approved the repayment process must begin in about a month of filing. The payments are normally paid to a Trustee who oversees distributing the money fairly to creditors. The creditors are bound by law to adhere to this plan and are unable to collect any other claims from the debtor. You will work with your attorney to set up a reasonable repayment plan for you.

Chapter 13 bankruptcy has a full discharge option when the debtor has completed all the required payments. This type of bankruptcy plan also allows for a repayment plan even if the creditors disagree with it. They do have the option to file an objection, but if it has been approved by the court these circumstances don’t allow them a lot of options. If you want to repay your debts but at a slower rate this is probably the way you want to go. You get out of debt and get to keep all your property.

Bankrutpcy Myths, Buying a house after Bankrtuptcy, Chapter 11 Facts, Chapter 13 Facts, Chapter 7 Facts, Choosing a Bankruptcy Lawyer, Closer look at Bankruptcy, Credit after Bankruptcy

Top 10 Bankruptcy Myths in Michigan

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Bankruptcy Myths #1: If I file for bankruptcy, I will lose everything.

This is a common misconception that keeps people who really should file for bankruptcy from doing it.  Federal and Michigan laws provide exemptions that can protect (up to a certain value) assets, such as your house, your car, money in qualified retirement plans, household goods and clothing.  For most people, they’ll lose nothing in the bankruptcy process!

Bankruptcy Myths #2: If I file for bankruptcy, I will never again be able to buy a house or a car.

Many of our clients are able to obtain new cars after completing the bankruptcy process.  However, each lender varies in their business practices so you may need to shop around.  Lenders take other factors into account as well, such as current employment, current income, and credit history.

To purchase a new home it usually takes a bit longer.  It typically takes about two years to get a house after you file for bankruptcy.

Bankruptcy Myths #3: If you’re married, both spouses have to file for bankruptcy. 

If one spouse has a significant amount of debt in their name only, it may make sense for only one spouse to file.  However, if there are joint debts then it may be prudent for both spouses to file.   If there are joint debts and only one spouse files then the creditor may still attempt to collect the debt from the non-filing spouse.

Bankruptcy Myths #4: I won’t ever be able to get credit after my bankruptcy.

Many of our clients are shocked by how quickly they’ll start getting credit card offers in the mail again.  By opening a new credit card and habitually making on-time payments your credit score will quickly improve beyond pre-filing levels.  Please see our credit repair kit to view other ways to increase your credit score. We help our clients increase their credit scores through bankruptcy. It’s also important to monitor your credit score.

Bankruptcy Myths #5: People who file bankruptcy are financially irresponsible.

There are a multitude of reasons that people need to file for bankruptcy, many of which are out of their control.  Often it is because people run into very serious personal problems such as a job loss, serious medical issues, or a divorce.  Unemployment, the cost of running two households following divorce, or the cost of medical care have all driven well-intentioned Americans into bankruptcy.  It’s financially irresponsible to avoid your creditors, ignore your bills and drive yourself further into debt.  Millions of well-intentioned Americans have filed for bankruptcy and come out stronger and more successful!

Bankruptcy Myths #6: You can’t get rid of back taxes in Bankruptcy.

Certain federal, state and local taxes can be discharged under the bankruptcy laws.  There are several qualifications that must be met, but once these are met, the taxes may be discharged.

Bankruptcy Myths #7: It’s really hard to file for bankruptcy

Although there were new laws enacted in 2005, the new laws were drafted to prevent fraud and bankruptcy abuse.

Bankruptcy Myths #8: Everyone will know you have filed for bankruptcy.

It is unlikely anyone will know that you have filed for bankruptcy unless you tell them.  While bankruptcy is a matter of public record, someone would have to specifically track down the information using your personal information in order to find out if you filed for bankruptcy.

Bankruptcy Myths #9:  You can’t afford to hire an attorney.

At Firebaugh & Andrews , initial consultations are FREE!  Money is never a reason we turn clients away.  We pride ourselves on our flexible payment plan options which can be customized to your unique circumstances.  In our experience, the worst thing a client can do is obtain legal advice from the internet, co-workers, family or friends.

Bankruptcy Myths #10: There is a minimum amount of debt required to file for bankruptcy. 

There is no minimum amount of debt required to file for bankruptcy.  Every situation is unique.

Call Firebaugh & Andrews today for your free consultation 734-722-2999