Frequently Asked Questions about Bankruptcy
What is bankruptcy?
Bankruptcy is the legal method for a debtor to discharge or
relieve debt. Bankruptcy is a way for people or businesses who owe
more money than they can pay to either work out a plan to repay the
money over time or to have their debt wiped out. While no debtor is
guaranteed a total discharge, most debtors who file for bankruptcy
are given such relief. One of the primary purposes of the bankruptcy
act is to relieve the honest debtor from the weight of oppressive
indebtedness and to provide the debtor with a fresh start.
Throughout the whole bankruptcy process creditors must stop their
collection efforts. The Bankruptcy Code is categorized by several
chapters with Chapter 7, Chapter 13 and Chapter 11 being the most
common. Debtors have different responsibilities for dealing with
creditors under each of these chapters.
Do I qualify to file bankruptcy?
You do not have to qualify to file bankruptcy. Any person,
partnership, corporation or business trust may file bankruptcy as
long as you are willing to follow what the law requires. United
States citizenship is not a requirement. Loss of job, medical
difficulties, or divorce are among the most common reasons people
consider a bankruptcy; however, they are not legal prerequisites. A
common scenario is that many working people find it difficult or
impossible to pay high credit card interest and fees. Bankruptcy
offers an alternative to the chronic harassment of creditors who are
unwilling to work within your financial limitations. Since credit
cards make it very difficult to regain your financial stability once
you get behind in payments, a bankruptcy makes sense if you see this
situation becoming chronic without an end in sight.
What is Chapter 7?
This is often called a "straight" bankruptcy. Debtors usually
receive their discharge soon after they file and they are allowed to
keep any money they earn after they file. In Chapter 7, debtors are
required to give up "non-exempt" property and laws in Michigan have
different requirements. Some debts will be dischargeable while
others will not. Determining exempt property (or property you are
allowed to keep) and knowing how to handle the issues of
dischargeable and non-dischargeable debts are the most important
reasons to be fully prepared before you file, and
since Attorney Walter Metzen is Board Certified in Consumer
Bankruptcy Law, he is highly experienced and will be able to address
these issues for you.
What is Chapter 13?
Chapter 13 is the "wage earner" chapter. Debtors who have a
regular source of income repay some or all of their debts over a
three-to-five year period during which they are free from harassment
from their creditors. The most common reason people file a Chapter
13 is that debtors have a pending foreclosure because the Bank
refuses to work out a reasonable repayment plan. A Chapter 13 filing
forces the bank to accept back-due mortgage payments over 3 to 5
years. At the end of the repayment period, debtors are issued a
discharge order. While Chapter 13 is a far more involved process
than a Chapter 7, it will discharge debts that Chapter 7 will not,
and sometimes it is the only way for people to protect their home or
other assets from their creditors.
Will my spouse be responsible for my debts if I file
Not unless he/she is personally liable on any of the debt you
hope to discharge in a bankruptcy. It is important to make sure that
there are no courtesy credit cards issued to your spouse that make
them liable. If you have a joint credit card or car loan with a
spouse that is listed in a bankruptcy, this will not affect your
spouse's credit as long as the payment continues to be paid when
Will I lose everything I own if I file bankruptcy?
It is a popular misconception that bankruptcy necessarily leads
to the loss of all property. People frequently keep their homes,
cars and other assets in bankruptcy cases as long as they continue
to repay their loans. Each state has a limit on allowable property
values and you want to make sure your property is within these
guidelines. You will be best served by a qualified bankruptcy
specialist who understands what those limits are and who can advise
What affect will bankruptcy have on my credit?
Chapter 7 bankruptcy will stay on your credit report for ten
years and Chapter 13 will be there for seven years. If you are
currently contemplating bankruptcy, it is likely that your current
credit rating has already been affected. Being legally liable for
debt which you cannot repay significantly lowers your credit score.
Ironically, a bankruptcy may help restore your credit faster rather
than letting chronic debt continue. It is quite common for people to
be offered credit cards shortly after completion of a bankruptcy and
for people to purchase homes within several years of completing a
bankruptcy. Lenders will tell you that it is easier to secure a
major loan after a bankruptcy if there are steady, regular payments
on your accounts. If you want to obtain a mortgage within two years
of discharge, the size of your down payment and the stability of
your income will be more important than the fact that you filed
bankruptcy. Once your bankruptcy has been discharged, your creditors
have to report to credit agencies that your accounts now need to
read as zero balances and Attorney Walter Metzen can show you how to
make sure this is done.
Do I have to go to court?
Every debtor, no matter what chapter is filed, must attend a
meeting of creditors. In almost all Chapter 7s, this is the only
hearing that is required. A trustee is appointed by the United
Trustee's Office to oversee each case. A judge does not attend the
creditors' meeting. This hearing (known as the 341 meeting from the
federal code that it refers to) allows the trustee to look at your
bankruptcy papers while asking you various questions about them.
Attorney Walter Metzen will prepare you for these hearings and
will attend them with you. 341 hearings are usually fairly short.
Is it possible to choose which debts I can get rid of in
Reaffirmation agreements are normally used to allow debtors to
keep things such as a home and cars by continuing to make timely
payments to their creditors. This debt will no longer be
dischargeable and the agreement cannot put an undue burden on
debtors or their dependents. These agreements should be carefully
and fully considered before entering into them.
We are sure you have other questions that are specific to
your case. Whether you are an individual or small business owner,
Attorney Walter Metzen looks forward to speaking with you. Your
first office visit will be completely free of any charge.
The information contained here is for educational purposes only
and it is not intended as legal advice nor does it constitute
the establishment of an attorney-client relationship. You should
consult a bankruptcy attorney for specific advice about your