Michigan Chapter 7 Bankruptcy - Overview

Chapter 7 is a bankruptcy in which you generally discharge all your debts and make no payments to your creditors unless the credit is for vehicle or mortgage and you wish to retain the property.

In Chapter 7, it is required that you list all your creditors on the petition even in if you want to retain and pay them such as a house or car loan.  Some debts may not be discharged.  Examples of debts that are not discharged are child support, student loans under most circumstances, certain taxes, etc.

Utilities should be listed as a debt if there is a delinquency.  If you list a utility, you will be required to pay a deposit within 20 days after you file which is generally 1 ½ times the highest monthly bill for that utility.  You must also pay all your future utility bills.  If your bill is current or the delinquency is small and easily paid up it is not necessary to list the utility since the security deposit may be greater than the bill.

It is required that you list all of your property on the schedules.  Failure to list property, which includes anything of value which you own or have an interest in, could result in denial of your discharge or criminal prosecution.  Examples of property which must be listed are household goods, vehicles, houses or other real estate that you may have an interest in, any money owed to you, lawsuits pensions, IRAs, benefits, bank accounts, any financial account, stocks, bonds, child support, pensions, potential claims regarding any benefit or law suit, tax refunds, inheritances or property from a divorce to which you become entitled to within 6 months of filing, etc.  Be careful to review your schedules to make sure that all of your property is listed.

The bankruptcy laws allow you to exempt your property in most cases.  Examples of typical exemptions are approximately $30,000.00 under Michigan bankruptcy law for equity in a home; under Federal bankruptcy law you can have approximately $9,000.00 in household goods; you could also exempt approximately $9,000.00 in cash under Federal exemption in certain cases.  Our bankruptcy attorneys will review the property you have listed on the schedules and determine the proper exemptions.

You may retain property such as a house or vehicle or certain financed household goods as long as you continue to keep the payments current and sign a reaffirmation agreement provided by the creditor.  Certain creditors especially for vehicles may stop sending a statement after the case is filed and if you want to keep this property you must maintain the payments.  Reaffirmation agreements are only valid if filed with the court. Reaffirmation agreements can be cancelled at anytime prior to discharge or within 60 days of filing the agreement. Cancellation of a reaffirmation agreement should be done in writing and filed with the court.  The effect of reaffirming a debt makes you liable for the debt after the bankruptcy is closed and allows a creditor to sue you on the debt if it becomes delinquent.  If a reaffirmation agreement is not entered into for a vehicle or other property, the creditor may repossess the vehicle or property within 45 days after the first meeting.

If you have a joint obligation with a spouse or co-signer, he or she will still be responsible for that debt unless he or she also files for bankruptcy.

If you have any funds in a credit union and you owe them money they will set-off the funds you have after the case is filed.  There is generally one hearing you must attend approximately one month after the case is filed.  You should show up approximately 20 minutes early for the hearing to review the case with the attorney.

Approximately 3 months after you go to court, you will receive a discharge in the mail.  This concludes the case and your file will be closed.  You will be given a copy of your Petition in court.  You should keep a copy of the Petition and Discharge for 10 years because future creditors may want to review the documents.  Our law office will maintain records of anything you signed for 5 years; the other documents may be purged from the file shortly after your case is closed.

The bankruptcy will be reported on your credit for 10 years from the date that you file.  Your credit history will still appear on the credit report; however, the creditors have no legal right to collect unless the debt is non-dischargeable.  You can usually purchase a vehicle after the discharge; however, the interest rate will generally be very high.  You may be able to obtain a mortgage or refinance a house usually 1 to 2 years from the date of filing.

After you have retained our law office, a legal assistant will prepare your petition.  She or he may contact you regarding information necessary to complete the petition.  The petition can be prepared quickly, if you provide all the requested information promptly.

The full fee must be paid before filing your case.  You may make partial payments.  The refund policy is disclosed in the retainer agreement.

At the appointment to review and sign your petition, you must have all the documents requested in your case necessary to present to the court, such as titles to vehicles, recorded mortgages, recorded deeds, mortgage balance statements, pay stubs and other proof of income for the 60 days prior to your filing and proof of all household income for the period of 6 months prior to your filing, including your spouse's income, even if your spouse is not filing, etc.