Michigan bankruptcy clients forget creditors all the time.  Or, don’t even know they

owe some body money, especially medical bills, which often show up months later.

Some people panic:  I already had my bankruptcy hearing, is it too late?  How much

trouble am I in?  Will I have to pay this bill?

image credit: dreamstime

Bankruptcy law gives the debtor, that is you, the person filing the bankruptcy, the

right to amend the schedules any time so long as the case is open.

Now, you have to give the creditor notice when you file the amendment adding the

creditor, and, in Michigan Chapter 7 bankruptcy cases, the creditor gets time to

object to the discharge, as they would if they had received timely notice.

What if you already received your Chapter 7 discharge?

Michigan is in the 6th Circuit, which, like most circuits, allows a case to be

re-opened to add a creditor.  However, the 6th Circuit ruled that there is no reason

to re-open a case to add a creditor if (1) it was a no asset case unless (2) the creditor,

now that it knows about the bankruptcy, wants to object to the discharge of the

debt.

Michigan allows the use of the Federal bankruptcy exemptions, so most cases are

no asset bankruptcy cases.

So, in a Chapter 7 bankruptcy case, you can add an omitted creditor any time as

long as your case is open.  The creditor will have a chance to file a proof of claim, if

trustee has collected assets, and a chance to object to the bankruptcy discharge.

In a Chapter bankruptcy 13 case, the same rules apply, up to the deadline to file a claim.

That is, if the creditor had actual notice of the claim.  That way, there is no prejudice, as

we say in the law biz, no harm to a creditor who finds out in time to file a claim and get paid

as Chapter 13s are payment plans.

If no notice to the creditor in time to file a claim, no discharge of that debt.

A number of other bankruptcy experts across the country are playing the “alphabet game”,

writing on topics that begin with each letter of the alphabet.  The other topic that

begin with the letter “O” are listed below.

Objection    Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell
Own    New York Bankruptcy Lawyer, Jay S. Fleischman
Omitted    Bay Area Bankruptcy Lawyer Cathy Moran
Options to Bankruptcy    Suburban Philly Bankruptcy Lawyer, Chris Carr
OOPS    Metro Richmond Consumer and Bankruptcy Attorney, Mitchell Goldstein
Objection to Discharge    Hilo Bankruptcy Attorney, Stuart T. Ing

Related posts:

1. C Is For Creditor
2. The Truth About Bankruptcy Fraud
3. The Truth About The Means Test

photo credit: dreamstime

What the hell is Chapter 11?  Just the name gives most people a headache.

OK, maybe not as much of a headache as if you work for a company that files

Chapter 11 bankruptcy, or, if a company that owes you money files under

Chapter 11.

Most Chapter 11 bankruptcies are filed by businesses that want to reorganize,

because, obviously, something bad happened.

Probably not as bad as sunk as this boat.

Generally, the bigger a business is, the more complex it is, and the more

involved the bankruptcy case will be.

But individuals can file Chapter 11 too!

This does not excite you?

Chapter 7, or straight, or liquidation bankruptcy, is what most people file, and

where many companies  which start in Chapter 11 end up.

In Michigan bankruptcy cases, rarely is anything liquidated; most people who

file do not lose any property to the Chapter 7 trustee.

Chapter 13 is a payment plan for individuals with regular income.  Corporations

cannot file Chapter 13 bankruptcy.

Companies that file Chapter 11 can get out of union contracts, and most other

contracts for that matter.  The court can re-write the terms of secured loans;

unsecured creditors, ones with no collateral, are lucky to get pennies on the

dollar.  As for those who own stock or bonds, well, check with your friends who

owned GM or Chrysler stock.

Individuals in Chapter 11 cannot get the terms of the first mortgage on their

residence changed, but, can get mortgages changed on any other real estate

they own.

This can save a person in the business of, say, renting houses or apartments.

That is the point of Chapter 11, to allow reorganization, a payment plan that

pays what is required, and keeps the business going.

So, you could own 8 Michigan houses that you rent.  They are all underwater,

that is, worth much less than what is owed on them.  Yet, you still have paying

tenants.

But you can see this is going nowhere, you owe a million dollars more than they

are worth all totaled.

Bingo!  Chapter 11 allows you to re-write every one of those

mortgages down to the value of the home, and even change the interest rate,

and how many years are left on the mortgage.

Do you have any questions about Chapter 11?

Related posts:

1. What You Need To Know About Chapter 11
2. Michigan Business Bankruptcy
3. What Is A Chapter 7 No Asset Report?

(image credit:  dreamstime)

You have your bankruptcy discharge, and now, you get an offer in the mail for:  another credit card!

It feels great!  You thought it would take years to “build up” your credit again!  You just wiped out thousands of dollars of credit card debt.  Why would the bank send you an offer for a new credit card???

Is it a good idea to get a credit card?

Why is it easier now?

Well, time was, billions, yes, billions, of applications were mailed out each year.  By banks eager to help you.  NOT.

By a money lending industry whose business model was dependent on you defaulting so they could make money.

Yes, if you paid that credit card off each month, there was no profit.  The money they charged the retailer barely met the overhead.

And they offered low interest rates, even zero, if you paid off another account or debt and borrowed money from their credit card.

Then, if you ever defaulted, you got that penalty rate of 29.99% or whatever, and late fees, and so on.

The credit card “agreement” said they could change the terms whenever the urge struck them.

Like free heroin until you get addicted, then, pow!  Price increase!

So, the Fed is now virtually giving the banks money to lend, so even at 3%, with normal default rates they make a killing.

Some $75 billion of credit card debt has been written off by the poor banks since hard times began.

The credit card default rate is about half of what it was a year ago, according to our friend at the Fed, in the same story linked to above.

Would you trust an offer from these guys?

(image credit:  dreamstime)

Well, I hope not.

Dave Ramsey’s book gives good advice about credit cards and other family finance issues.

Rich people do not have credit cards, they have money.  They did not get money by spending on credit cards.

They got it by saving.

Use a debit card, if you must have plastic, but, don’t go back into debt after bankruptcy.

It is no mystery why you get a credit card offer, even after filing bankruptcy:  the rats want you in debt again.

Related posts:

1. But, I Have To Have A Credit Card!
2. Credit Card Debt Defaults Record High
3. How Does My Credit Card Company Find Out So Much About Me?

H is for home value, in the Alphabet Game, bankruptcy experts across the country blog on different topics.

I always ask potential clients this question, how much is your home worth?, I mean, really, and the response frequently is something like:  well, it is worth $200,000, but right now, I can only get maybe $160,000 for it.”

So, what do we mean by “worth”?

There are state tax valuations, which are normally not worth the paper they are written on, and worth even less these days.

How about that last bank appraisal?

The one you did for the re-finance back in 2008 or earlier?

Uh, no good.

Most appraisals during those peak bubble  years were bogus, done to hit a number that would allow the mortgage to go through and the mortgage broker to take a commission.

What I mean is, what would a willing buyer pay, right now, as is, no painting or other fix up.  Your best guess as to the actual market price, usually based on sales of similar homes close by.  Almost everyone I talk to has a foreclosed home, or more than one, for sale nearby.

If your neighbor’s house is basically the same as yours, maybe a little better, and is for sale for $150,000, that means, it is worth less than that, or someone would have purchased it at that price.  So, your home is also worth less than that.

Doug wrote about renting v. buying a home this week, and I recommend everyone do this.

If you are in a home now worth less than what is owed, and have trouble making the payments, you need to figure out the answer to our question:  How much is your home worth?

Most of us, due to wishful thinking, I suppose, overestimate the value of our home.

Get a free estimate from a local realtor, but, get a good answer on the value.

Don’t assume prices are going to rebound soon, either.

I have seen estimates of another 20% decline in home prices over the next year.

You cannot do intelligent financial planning without knowing stuff like this.

image credit:  Master Isolated Images

OTHER LETTER “H” TOPICS:

Hearing    Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell
Homeowner’s Association Dues    Marin County Bankruptcy Attorney, Catherine Eranthe
Household    New York Bankruptcy Lawyer, Jay S. Fleischman
House    Northern California Bankruptcy Lawyer, Cathy Moran
Homestead    Colorado Springs Bankruptcy Lawyer Bob Doig
House    Los Angeles Bankruptcy Attorney, Mark J. Markus
Household Size    Hilo Bankruptcy Attorney, Stuart T. Ing
Honesty    Cleveland Area Bankruptcy Lawyer, Bill Balena
Honesty (and Fraud Avoidance)    Philadelphia Suburban Bankruptcy Lawyer, Chris Carr
Harassment by Creditors    Downriver, Michigan Bankruptcy Attorney, Christopher McAvoy

Related posts:

1. What Can You Do To Save Your Home From Foreclosure?
2. Home: Rent Or Buy?
3. The Modern Rules Of Home Financing

Are you better off than you were a year ago?

Record numbers of Americans are not.  Rasmussen Reports, the top polling agency, says 32% of us owe more than last year.

Not coincidentally, confidence in banks is at an all time low.

And the government doesn’t poll so well either.

With unemployment staying high, home prices not rebounding, incomes stagnant, there is no justification for owing more than last year.  That is, we do not have more equity in our homes to borrow against, and we are not making more money with which we could pay back more debt.

(image credit: dreamstime)

Seems to me there is only one conclusion:  HELL, NO!

Each case is individual, of course.  In Michigan, home values are down further, unemployment remains high, and economic growth is uncertain.

Across America, credit card delinquencies are increasing.

The end of the year is fast approaching, traditionally a time to take stock of where we are, spiritually and financially,

I will stick to the financial side.

I think one of the most difficult things we can do as humans, is to look in the mirror and see what is really there.  Hey, scares me sometimes!

Sooner is better than later, if you have a balance sheet from last year, that is, your assets, property and its value, and your liabilities, debts, you can compare where you are now to where you are then.

Better yet, write down your expectations for the next year.  Then you can review and see if you hit or missed.

I hate to hear from clients, and it happens all the time, that they borrowed against there 401ks, cashed out IRAs, just to make up the shortfall for a decline in income.

A client told me last week that she read most people do not file until two years AFTER they are actually bankrupt. Nobody wants to, nobody likes it, we do  not do things until we are emotionally ready.

Not that there is a right or wrong, it is not my face you see in the mirror, but, do the cold, factual analysis of where you are now financially, and where you will be in a year.

Talk to me for free if you have questions.

No related posts.

 Creditors may not all look like this.  OK, probably none of them do.  But that is what some of them make us think they are, on their way to bashing our heads in if we don’t fork over the loot.

Loot that we don’t have.

The bankruptcy code defines creditor as:

(A) entity that has a claim against the debtor (the person who filed bankruptcy) that arose at the time of or before the order for relief concerning the debtor;

It goes on to list definitions (B) and (C), but reading those gives even me a headache.

To further translate definition (A) into English, “entity” is a person or company or partnership or securitized trust, whatever, that claims you owe it monty.

The “order for relief” is the filing of the bankruptcy case.

Lawyers.  The way we write sometimes.  “at the time of or before the order for relief” just means before you filed the case, or, at the exact moment you filed the case.  That is how it reads.  Frankly, until re-reading this just now, I always assumed there was before and after a case was filed, and no “at the time of”.

Even before electronic filing online, courts had time stamps, and we knew the exact minute of the day a case was filed.

So, in the world of bankruptcy, Chapter 7 or Chapter 13, we have debtors, the good guys, the people who file, and, creditors, the ones trying to get money, the bad guys, no the other.

Oversimplification, I know, but, this is a blog, not an encyclopedia.

The important thing about creditors is TO LIST THEM ALL ON YOUR BANKRUPTCY.  You do not have a choice, you are under oath in a Federal Court.  It is perjury to leave someone off the list, do you want to look at the sun come up in chunks? as one of my lawyer friends likes to say.  (Chunks would be the part between the bars on your prison cell.)

If there were one thing I could get from my clients by waiving a magic wand over their heads, it would be this one.  Tell me everything.  No thinking.  Anyone getting your money, trying to get your money, that you are paying money, that has any kind of claim against you for money, gets listed.

If you dispute the debt, you say you owe nothing, no problem, list them, and we check the box that says “disputed.”

Debtors benefit, because the court sends the notice to everyone, so the creditor knows to stop bugging you.

Oh, you say you don’t want to list cousin Sue, your plan to pay her.  MUST BE LISTED.  You can pay anyone you want.  The law does not require you to list only the ones you do not want to pay.

Don’t risk the prison cell.

Other C topics:

Conversion

Counseling

Cramdown

Competence and Compassion

Co-signer

Related posts:

1. Oh, Oh, Bankruptcy Danger: Omitted Creditor
2. Five Myths About Bankruptcy
3. The Truth About The Means Test

Are you better off than you were a year ago?

Record numbers of Americans are not.  Rasmussen Reports, the top polling agency, says 32% of us owe more than last year.

Not coincidentally, confidence in banks is at an all time low.

And the government doesn’t poll so well either.

With unemployment staying high, home prices not rebounding, incomes stagnant, there is no justification for owing more than last year.  That is, we do not have more equity in our homes to borrow against, and we are not making more money with which we could pay back more debt.

(image credit: dreamstime)

Seems to me there is only one conclusion:

Related posts:

1. Christ’s Message For Family Finances
2. Personal Property List
3. Are You Better Off Than You Were A Year Ago?

Fascinating individual story from the front lines of the economy.  How does a financial planner end up six figures underwater on his home?

Yahoo Finance has the story of Carl Richards of the New York Times, a financial adviser, who had to do a short sale on his big Las Vegas home.

(image from Dreamstime)

Related posts:

1. Michigan Bankruptcy Mortgage Options (Part Two)
2. What Is A Short Sale?
3. Personal Finances Then And Now

Although bankruptcy filings are down, unemployment remains high and fewer people are going to credit counselors.

Credit card debt went up again.

Some people may just be giving up.  No job, no income, no assets, means nothing for creditors to get; no reason to file bankruptcy.

But, what happens when you get that new job?  Will you be greeted with wage garnishments from judgements entered when you were broke?

One of my clients told me a couple of weeks ago that she read most people do  not actually file for bankruptcy until they have been bankrupt for a couple of years.

Seems right to me.  It is a tough decision to make emotionally.  Feels like failure.  All my clients want to pay their creditors, they go to extremes, even taking out retirement funds that creditors cannot get.

We humans do not do things until we are ready.  We avoid pain and seek pleasure.  Nothing wrong with that.

So, when the pain of making the decision to seek protection and relief by filing bankruptcy is exceeded by the pain of putting up with the harassment, and the chronic shortage of money, the inability to get new clothes or do anything fun, accepting the reality that there is not enough money coming in to pay everything going out, that is when people actually file bankruptcy.

I do not push people into bankruptcy.  I view my role as, explaining the options.  If you go left, this can happen, if you go right, these things can happen, if you stay where you are, these are the possibilities.  Which is the “best” way is always subjective.  I explain the upside and downside of each option.

The thing to remember about filing when you are broke:  that is the best time.  Creditors will not be able to argue that you can afford to pay something, and should be in Chapter 13 instead of Chapter 7.  This can be a problem when you get back to work, as, all of a sudden,  you will have some money left at the end of the month after paying your living expenses.

If you have any questions, ask away!

photo credit:  random places

No related posts.

“I am being sued by capital one for a credit card debt…I’m unemployed…will I still have to pay if I lose in court?”

Someone posted this question to me.  I never know what the enemy may do, but, here are the possibilities:

So here comes the long winded answer about money judgments in St. Clair Shores and everywhere else in Michigan.

For a creditor, bank, credit card company, whoever, to get a judgment against you, they have to sue you in a court.  The court has to be in the city or county where you live.

Bankruptcy stops lawsuits, so, if you file, that is the end of the lawsuit.

If not, you have 21 days if served personally, or 28 days if served by certified mail, to file a written answer with the court.  You, not the court, also have to send a copy to the lawyer suing.

If you do not answer within the allowed time, you get no more notice of proceedings in the court.  The court assumes you have chosen not to participate.

A default judgment will be entered against you.  That is a paper the judge signs that says you owe the money.  The significance is, after the appeal time runs, your wages can be garnished.  In Michigan, they can also get bank accounts in your name and state, not federal, tax refunds.

The court can issue an execution on the judgment, against non-exempt property.  A judgment lien can be recorded against your house.  This lien is behind government liens, like property taxes, and mortgages.

Garnishment and execution papers are supposed to be served on you as well.

The judge can stop a wage garnishment based on a default judgment if you file a petition for partial payments and it is granted.  The motion must show your income and living expenses, and how much you can afford.  If you get the order, you pay the amount you asked for TO THE COURT.  As long as the money comes in, the court will not issue any further wage garnishments.

This discussion assumes you do owe the money and have no defense to the lawsuit.  If you do have a defense, you might win a trial and not have a judgment against you.

It is not a defense that you do not owe the money.  The only issue for the court is, is there a contract and did you breach it?

If yes, then it is just a matter of figuring out how much you owe.

photo credit daniel moyle

Related posts:

1. But The Divorce Judgment Says He Has To Pay
2. C Is For Creditor