The information contained in this web site and all related sites is general legal information only. It is not intended nor should it be used as specific legal advice on a particular issue or for a particular person or purpose. If you are seeking legal advice for a specific situation, you should seek the advice of an attorney qualified in the legal area in which you need advice. The exemptions described in this communication are Federal exemptions permitted to be used by Michigan residents and may not apply in other states.

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WHAT IS BANKRUPTCY?

Bankruptcy allows a person who cannot pay his or her bills to get a fresh financial start. The bankruptcy immediately stops all of your creditors from seeking to collect debts from you. A bankruptcy may make it possible for you to eliminate the obligation to pay most or all of your debts. If you are facing a foreclosure, it may stop a foreclosure on your home and allow you an opportunity to catch up on missed payments. It may also prevent repossession of a car or truck. There are different types of bankruptcies to deal with different financial problems. A competent bankruptcy lawyer will obtain the necessary information to determine which type of bankruptcy is most appropriate for you. Most people will want to file either a chapter 7 or chapter 13.

WHAT IS A CHAPTER 7 BANKRUPTCY?

A person who files under Chapter 7 is called a debtor. A Chapter 7 debtor retains his or her exempt property. In most cases, all of the debtor's property is exempt. The debtor receives a Chapter 7 discharge. This is a court order releasing the debtor from dischargeable debts and ordering the creditors not to attempt to collect from the debtor. A discharged debt does not have to be paid. Some debts, however are not dischargeable under chapter 7. The most common types of non dischargeable debts would include some types of tax debts, alimony, child support, certain fines and penalties. This list is not exclusive and certain other types of debts may not be dischargeable. Your bankruptcy attorney will describe the types of non dischargeable debts to you at your initial consultation.

MAY A HUSBAND AND WIFE FILE JOINTLY UNDER CHAPTER 7?

Yes, a husband and wife may file a joint Chapter 7 petition. Only one set of bankruptcy forms are needed and only one filing fee is charged.

MAY I KEEP ALL OF MY PROPERTY?

The bankruptcy law allows you to keep exempt assets. In most states, you may choose between Federal and State exemptions. In many, but not all, the Federal exemptions are better because they will allow you to protect more in assets.

Some of the Federal exemptions you are entitled to are:

$18,450.00 in equity in your home and $36,900.00 if you are married;

If you do not need to use all of this amount, up to $9,250 of the unused portion may be used to cover any other property you choose (double this amount if you are married); additionally,

$2,950.00 in equity in your car

$475.00 per item in your household goods up to a total of $9,850.00.

The amounts of the exemptions are doubled when a married couple file together.

Equity in property is the amount in value after subtracting the amount of debt. For example, if you own a $75,000.00 house and owe a mortgage debt of $50,000.00, you would have $25,000.00 equity in the house. To keep the property you only need to protect the equity in the property, not the entire value.

The above list is just some of the exemptions. It is not all inclusive. There are additional exemptions to protect other assets in the Bankruptcy Code. This is such an important topic to anyone who is considering filing a bankruptcy that they are urged to fully discuss it with a qualified bankruptcy attorney.

WHAT HAPPENS TO MY HOUSE OR VEHICLE?

If you are current in your payments or will be able to bring your payment current shortly after the bankruptcy has been filed, you may keep the exempt asset and continue to pay the mortgage or lien holder as you did previously. You may enter into a reaffirmation agreement with the secured creditor that will again make you personally liable and re-obligate you on the debt. You will need to discuss this topic with your bankruptcy attorney.

WHAT IS CHAPTER 13 ?

A Chapter 13 allows a person to repay all or a portion of his or her debts under the supervision and protection of the bankruptcy court. A person who files under Chapter 13 is also called a debtor. The debtor's attorney submits a plan to the court for approval. The plan specifies how much will be paid on a regular basis to the Chapter 13 trustee for disbursement to creditors. A plan usually lasts three years but may be extended to five years under certain circumstances. When the debtor has successfully completed the payments called for in the plan, the debtor receives a discharge of his or her liability for the remaining balances of the dischargeable debts. There are many debtors who need to file under Chapter 13 rather than under Chapter 7. This may be because they have assets that would not be completely exempt if they filed under Chapter 7, or they may have debts that will be better handled under Chapter 13. Certain types of non dischargeable taxes, student loans, mortgage foreclosures and vehicle payment delinquencies or repossessions are often better dealt with in a Chapter 13.

IN SUMMARY

Bankruptcy law is very complex. You should seek experienced and trustworthy legal advice. The information on this Web Page is a very brief overview of bankruptcy law. It is not intended as specific legal advice for any person. It is general information for people who are thinking about bankruptcy. Always consult with a bankruptcy attorney licensed to practice law in your state as the law often changes and the Federal exemptions may not be available to you in your state.