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Wayne County Bankruptcy Law Blog

Chapter 13 offers benefits despite distant discharge date

When most Wayne County residents think about filing for bankruptcy, the images that come to mind are from the Chapter 7 liquidation process. They think of potentially losing some assets like a house or car that are used to secure debts, and they see their debts quickly swept away. Many are less familiar with what happens in Chapter 13 bankruptcy, even though it is an important option to consider.

An important distinction between Chapter 7 and Chapter 13 is the discharge date. This is a technical way of referring to the date on which one's debt is formally forgiven -- or at least, those debts that qualify. In Chapter 7, the discharge date typically comes around four months after the initial filing. In Chapter 13, however, the discharge date will be at least three years down the road, possibly four or five years.

Chapter 7 may help older residents struggling with debt

Last week on our Wayne County bankruptcy law blog, as we were discussing the consumer medical debt crisis in this country, we mentioned how some turn to credit counseling or debt negotiation agencies for debt relief. There may, as we mentioned, be underlying concerns about the true interests or even the legitimacy of some such companies. This week, we want to highlight another situation in which Chapter 7 bankruptcy may be a better option for Wayne County residents who are seeking a fresh financial start.

A reader recently commented in a national publication that her mother is almost 80 years old and struggling with debt. On top of that, memory problems make budgeting and paying bills a confusing and frustrating endeavor. While this elderly woman's Social Security and retirement benefits remain at a set level, her monthly credit card payments have been steadily rising thanks to exorbitant interest rates. These two factors -- increasing payments and a fixed income -- make for a seemingly impossible situation.

Disturbing new statistics on medical debt

Many Wayne County residents spend their lives with strict financial priorities and goals in place. They pay their bills on time, avoid carrying credit card debt and add to their savings each month. The possibility of ever filing for bankruptcy is probably the furthest thing from these individuals' minds. But staying well-informed financially means having at least a basic understanding of one's legal rights and options should the unexpected occur.

One unexpected expense many Americans struggle with is medical debt. Given the sudden nature of many serious illnesses and the astronomical medical and hospitals bills that can accrue, it's virtually impossible to save up in anticipation of such an event. But debt collection firms don't distinguish between this and any other type of debt; over 30 million people in this country dealt with debt collectors in 2010 on the basis of medical debt alone. And a recent study of bankruptcy filings from seven years ago found that almost two-thirds of them were related to health care or medical debt.

As cupcake craze dies down, bakery files for Chapter 11

The cupcake craze of recent years swept Michigan just like every other part of the country. For one little East Coast bakery that first opened its doors in 2003, the national sweet tooth opened up opportunities to expand the business, even going public less than 10 years later. Crumbs was famous for its calorie-packed cupcakes, which sold for around three or four dollars apiece.

However, with changing tastes and perhaps the end of a fad, the company saw year after year of dwindling cash flow, and Crumbs finally made the decision to file for Chapter 11 bankruptcy. Crumbs Bake Shop initiated the business bankruptcy filing after defaulting on a loan of over $9 million. It closed all of its almost 50 stores and retained only nine of its over 450 employees.

Michigan senior too late to stop foreclosure, town fights back

Wayne County residents may have heard the recent story about an unorthodox foreclosure in a neighboring county. The details are chilling, and may raise questions about what actions our readers can take to stop foreclosure in their own situations.

The story involves a woman in her mid-eighties who lives alone in a condo that she has owned for almost 30 years. She originally paid $60,000 for the condo, which is now valued at $100,000. Her association fee of $160 is automatically paid from her account every month, but last year she was assessed a repair fee of just over $340 above and beyond the monthly fee. That sum was not withdrawn electronically and the owner never saw a bill.

Chapter 7 can bring independence from overwhelming debt

With Independence Day 2014 now in the rear-view mirror, many Wayne County residents will find themselves reflecting on the possibility of their own independence -- from credit card debt, that is. The good news for these folks is that there are a number of options on the table. These range from some common-sense best practices in their day-to-day budgeting for smaller debts to more comprehensive solutions for overwhelming debt.

The first thing one must do in order to begin to chip away at credit card debt is to stop adding to it -- i.e., stop using credit cards altogether. Then, look at where in the budget cuts can be made to free up the money necessary to start paying down the debt. Deep cuts may be required, especially if one intends to make more than just the minimum monthly payments (usually a must in order to really start putting a dent in the debt).

Stopping creditor harassment with Chapter 13's automatic stay

Wayne County residents struggling with debt are probably all too familiar with debt collectors and the types of practices they use to try to collect. They may not, however, be familiar with the types of limits the law places on what collectors can and cannot do. And Wayne County residents have some legal options of their own that can protect them from debt collectors.

On the one hand, debt collectors do have the right to try contacting borrowers at home, between 8 a.m. and 9 p.m., whether by phone, fax, mail or an in-person visit. They can also contact borrowers' places of employment, but they cannot continue calling if the employer wants the calls to stop. And they can reach out to a borrower's friends and family members for help locating the borrower -- but, importantly, they cannot say they are trying to collect on a debt (or how much a borrower owes).

Michigan commercial bankruptcy case converted to Chapter 7

We've discussed a number of business bankruptcy cases in recent weeks on our Wayne County bankruptcy law blog. The latest involved a national restaurant chain emerging successfully from Chapter 11. However, one recent example of a commercial bankruptcy right here in Michigan highlights the importance of a sound reorganization plan when filing for Chapter 11, and the consequences of failing to develop one in the time allotted.

The business in question is a shopping center in a town a few hours northwest of Wayne. The developer had a successful record of strip malls and chose the site of an old apple orchard for this particular one. It failed to secure full funding, however, with the only tenant eventually suing the developer for failing to complete the rest of the mall on time.

Debt relief for student loans can be hard to come by

Student loans have become a double-edged sword in recent years. While they make obtaining a college education possible for many who could not otherwise afford it, they can come back to haunt young people after graduation.

Federal student loans do come with many perks, including low interest rates and flexible options for repayment. One option, called Pay As You Earn, caps the amount borrowers are required to repay each month based on their income. This program has thus far been limited to relatively recent borrowers, although Wayne County residents may have heard news of President Obama's recent announced that eligibility for Pay As You Earn will now extend to older loans as well, bringing some relief to an estimated 5 million additional borrowers.

Commercial bankruptcy helps pizza chain slice up its debt

Just about a month ago, our Wayne County bankruptcy law blog talked about the case of a cosmetics company that made a major announcement. By choosing to pursue Chapter 11 bankruptcy, the company was going to try to reorganize and eventually resume operating without being held back by debt. Sound too good to be true? A major national chain restaurant has done just that.

It's likely that many Wayne County residents will be familiar with Sbarro pizza. The chain has over 800 restaurants in this country and abroad. Back in March, it sought to shed a vast amount of debt through a commercial bankruptcy filing.

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