Will I Automatically Lose Nonexempt Property?

If some of your property exceeds the given exemptions you use when filing for bankruptcy, you will not necessarily lose that property to the bankruptcy estate. You do have the option of turning that property over to the bankruptcy trustee in charge of your case, but you have two alternative options as well. The first applies only to chapter 13 cases, and involves what’s called a liquidation analysis. This analysis is designed to give creditors what they would be entitled if the nonexempt property was liquidated through a chapter 7 bankruptcy. The creditors are eligible to receive the remainder of the liquidated assets after the trustee’s fees and other priority debts have already been settled. The second option can be done in chapter 7 cases, and it involves “buying back” the nonexempt portion of your property from the bankruptcy estate. For instance, if your car’s value exceeds the exemption value by $500, you would have the option to exempt all but the $500 and then arrange to pay the bankruptcy trustee the nonexempt $500. In most cases you should have the option to pay back this excess in smaller installments.

If you are considering filing for bankruptcy and are concerned or confused about what sort of property you can exempt, it would be to your advantage to set up a consultation with a local bankruptcy attorney.

How Much Property Can I Exempt?

When filing for bankruptcy in the state of Michigan you will have two sets of exemptions you can choose from. These sets are the federal exemptions and the state exemptions. Both exemptions dictate how much property you can exempt, but they differ as to what kind of property you can exempt and how much property you can exempt for each specific type of property. One important thing to keep in mind is that you can’t mix and match between different exemption amounts between the two sets of exemptions--you can only pick one set of exemptions when you file. It would therefore be advantageous for you to come up with a list of property you own and how much it’s worth, and then compare between both sets of exemptions to see which set would benefit you the most. In general here’s a quick comparison between the two:

State Exemptions:

Homestead exemption: $40,475 (up to $60,725 if you are older than 65, unlimited if you own home with spouse)

Vehicle exemption: $3,725

Household goods: $4,050

Tools of trade: $2,550

Federal Exemptions:

Homestead exemption: $25,150 (up to $12,575 that isn’t used for this exemption can be added to the wildcard exemption)

Vehicle exemption: $4,000

Household goods: $13,000

Tools of trade: $2,525

Jewelry: $1700

Wildcard exemption: $1,325 (can be up to $13,900 if using leftovers from homestead exemption)

If you are concerned about which set of exemptions would benefit you the most, it would be to your advantage to set up a consultation with a local bankruptcy attorney in order to better understand your options.

How Often Can I File for Bankruptcy?

Both chapters 7 and 13 have specific requirements which determine how often a debtor can file for bankruptcy, which differ depending on which chapter has been previously filed. These requirements are only enforced if in your previous case you received a discharge. For both chapters there is a rule prohibiting those who attempted to file for bankruptcy within the past 6 months and had their case dismissed from attempting to file again. For debtors interested in filing for chapter 7 but have previously filed a chapter 13 bankruptcy there is a 6 year waiting period that can be exempted if the initial chapter 13 plan was a 100% plan or a 70% plan made in good faith with the debtor’s best efforts applied. For debtors interested in filing for chapter 7 who have previously filed a discharged chapter 7 bankruptcy, there is an 8 year waiting period. For debtors interested in filing for chapter 13 who have already previously filed a chapter 13 bankruptcy there is a 2 year waiting period from the date of filing. Since most chapter 13 plans take 3 years to complete, there is the possibility of filing another chapter 13 bankruptcy the day you receive your discharge for your first chapter 13 bankruptcy. Finally, for debtors interested in filing for chapter 13 who have previously filed  chapter 7 bankruptcy, there is a 4 year waiting period before you would be permitted to file.

To better understand if filing for bankruptcy is the right action for you, it is recommended you set up a consultation with a local bankruptcy attorney.

Bankruptcy And Your Home

In bankruptcy, the "chapter" that you file can determine if you will be required to give up property (or your home) due to filing.  Under a Chapter 7 bankruptcy, depending on what your state requirements are, you are more likely to be required to surrender some or all of your property in order to pay back accumulated credit and/or medical bills.  However, under a Chapter 13 bankruptcy, you are not required to surrender any property.  In fact, filing for a Chapter 13 bankruptcy can stop a foreclosure if you are filing due to late mortgage payments.  Though you can often keep property under both chapters of bankruptcy, you are more likely to keep property under a Chapter 13 than with a Chapter 7.

For more information about both chapters of bankruptcy and how filing will affect you, please contact your local bankruptcy attorney.

Why Have A Lawyer In Bankruptcy?

          Attorneys are specialists on bankruptcy.  They know the ins, outs, quirks, and details that the internet is not able to tell you.  Their specialized knowledge on bankruptcy allows them to help you file under the right chapter of bankruptcy in order for a client to get the most out of the situation he or she is in.  Attorneys are able to make sure you categorize and treat your creditors in a manner to make sure you exit bankruptcy in the best possible position. They have access to updated forms and policies.  They have already formed relationships with the trustees and know how to keep your case on their good side.  And they know exemption law, which is vital to helping you keep your property during a bankruptcy. 

          For more information on bankruptcy and how a bankruptcy attorney can benefit your case, contact your local bankruptcy attorney.

Chapter 13 Bankruptcy and Your Credit Score

One common bankruptcy question is whether going through the process will negatively affect your credit score or not.  If you are filing for bankruptcy because you have been struggling with debt for some time, then your credit score is probably not going to change too much do to filing.  However, if you are filing for bankruptcy and you do have a high credit score, the score may take a small dive due to filing.  

During a Chapter 13 you are generally not allowed to take on any new credit, but once your case is discharged, you are able to start regaining your credit score, though you may have to pay a higher interest than usual for the first few years. After the discharge, you will be able to get your credit score back up to where it was.

For more information on how Chapter 13 Bankruptcy can affect your credit score, please contact your local bankruptcy attorney.

Bankruptcy Timeline

                When is the best time to file for bankruptcy?  After a consultation, most attorneys allow for their clients to wait to file until they can pay the filing fee, which can be paid in installments.  Though some clients may want to file right away to stop foreclosures or make debts go away sooner, there is an advantage to the time given to the clients between the consultation and actually filing. 

                The gap between deciding to go forth with the bankruptcy and filing with the court allows for the client to have the time they need to both make the filing payments and to gather all the documents necessary to proceed with the bankruptcy.  This time gap also allows for the client and attorney to work through all of the questions that the trustee or judge may have for the client once the bankruptcy goes through.  

                For more questions regarding the timeline of filing for bankruptcy, please contact your local bankruptcy attorney.