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Charles J. Schneider, P.C.
39319 Plymouth Road, Suite 1
Livonia, MI 48150
Phone: 734-237-1523
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Wayne County Bankruptcy Law Blog

CAN YOU AVOID YOUR CREDITORS AND NOT FILE BANKRUPTCY? PART I

All too frequently clients have said the following words, "Filing bankruptcy is the last thing I thought I would ever do", when the filing of a bankruptcy should have been thought of sooner. No one plans to file bankruptcy when they take out debts. The overwhelming majority of Americans voluntarily pay their debts. Credit card companies and other lenders count on this fact. Clients sometimes engage in strategies that may backfire in order to avoid filing bankruptcy.

The following strategy was engaged in by a client of another lawyer whose bank accounts had been garnished by creditors. In order to avoid further garnishments, the client decided to deposit the money from his paychecks into his mother's bank account to shield it from the garnishing creditors. This arrangement continued for over a year. He would later file bankruptcy and say that his mother paid his bills at his direction. He would state that at no time would his mother use his money for her purposes. He was in charge of the account. She was merely a delivery person acting upon his instructions. He had to, after all, take care of his family making sure his family would eat. It was his money.

Credit card debt rose for average U.S. citizens last year

Many Michigan residents are aware of the allure of credit cards. Credit cards offer the ability to pay for goods and services that a person may not otherwise be able to afford at the time. Sometimes, however, this allure can prove to be destructive - a fact millions of Americans can attest to. Countless people have experienced the nightmare of being trapped with credit card debt. To escape this trap, drastic measures often must be taken. Bankruptcy is one such measure.

Michigan residents may be shocked to learn just how high the total amount of outstanding credit card debt was in America last year. A year prior, the total was $606.75 billion, an enormous number. But as of December, that number is ever higher - outstanding credit card debt increased to $642.4 billion.

Let us explain how Chapter 7 can work for you

When people are struggling with overwhelming debt, it can be difficult to see a way out of the situation. People may be so wrapped up in trying to make ends meet that they don't even consider their other financial options. The pressure placed on a person by creditors, bills and other obligations can make the future seem bleak.

For Michigan residents in this situation, bankruptcy might be a good solution. While people may think that bankruptcy has a stigma, people need to understand that it is just a legal process to help those in need. Not only will filing for Chapter 7 bankruptcy stop all collection efforts by creditors, it will erase many of a person's consumer debts. These debts include medical debt, credit card debt and other unsecured personal debt -- like personal loans.

Stopping creditors with the automatic stay

When Michigan residents are facing overwhelming debt it can be scary. People may be concerned with how they are going to feed themselves, pay their bills, keep a roof over their head and pay for transportation to work. Creditors can make these fears even worse with their constant calls, threatening letters and legal action. Michigan residents may not know where to turn or how to even begin to get out of debt. People may know that bankruptcy can take months to complete, but need immediate relief.

Thankfully, bankruptcy laws provide immediate relief in the form of the automatic stay. When a bankruptcy petition is filed, the automatic stay goes into effect. The automatic stay automatically stops creditors in their tracks. Once the stay is in place, creditors are no longer allowed to take any action against a person to collect a debt. This powerful tool can give people some much needed breathing room as they sort out their financial issues.

What options does one have in a business bankruptcy?

Michigan business owners take pride in their work in building a successful business. However, sometimes, certain measures must be taken in order to prevent a company from falling under. Bankruptcy is one such measure that many business owners choose to take in order to restructure their businesses and keep the company alive. With bankruptcy, there are many laws involved and business owners often have a number of options available to them.

Business bankruptcy can take the form of Chapter 7, Chapter 11 or Chapter 13 bankruptcy. Each bankruptcy option has its own unique facets and knowing the differences can help business owners decide which options are best for them. It sometimes is a necessary first step to consult with an attorney before making such decisions, though. The initial consultation with an attorney may entail filling out an intake questionnaire and providing all necessary documentation. The business owner and the attorney then decide together whether or not bankruptcy is the right course of action.

One in 5 consumer credit reports affected by medical debts

As many Michigan residents are aware, in today's world, it can be difficult to avoid debt. With credit cards that offer ease of use and medical bills that can be impossibly expensive, debt is a reality that many Michigan residents have to face. Once mired in debt, it might seem like escape is all but impossible. However, for those stuck in a seemingly endless cycle of debt, there are options.

Debt is so common, in fact, that recent reports show that 1 in 5 consumer credit reports are affected by medical debts. According to a recent study by the Consumer Financial Protection Bureau, however, these debts usually total hundreds of dollars, not thousands. For low-income households, though, this is still a serious concern and many avoid getting the medical care they need because they fear falling further into debt.

The Final Report of the ABI National Ethics Task Force Creating Second Class Legal Professionals

The formulation of local bankruptcy rules is rarely, if ever, a democratic process where the consumer bankruptcy attorney has a voice in its composition. Indeed, it is solely within the province of the local bankruptcy bench with the approval of the District Court that the rules become effective. Much credit must be given to the judges of the Bankruptcy Court of the Eastern District of Michigan who have opened up the process of changing the local bankruptcy rules to local practitioners. Under the guidance of the court they have formed subcommittees to recommend changes. Among these subcommittees has been the formulation of an Ethics Subcommittee. The local Ethics Subcommittee's preliminary recommendations have been highly influenced by the FINAL REPORT OF THE AMERICAN BANKRUPTCY INSTITUTE NATIONAL ETHICS TASK FORCE as it appears to be written whole cloth from the report. The report sets forth a particular bias against consumer bankruptcy attorney fueling the view inspired by BAPCPA that most consumer bankruptcy attorneys are more ethically challenged than other bankruptcy attorneys. It, therefore, fuels the view that consumer bankruptcy attorneys are second class legal professionals in need of particular attention, scrutiny and monitoring. The bias appears to stem from the limitation of the rule as it applies to only those attorneys who file Chapter 7 cases on behalf of individual debtors, whose debts are primarily consumer debts and thereby engage in limited representation. The Final Report of the ABI National Ethics Task Force creates the same limitation under the heading: Best Practices for Limited Services Representation in Consumer Bankruptcy Cases on page 49. The heading is misleading as it goes much further than a recommendation for best practices. It provides for a local rule to be drafted that would compel the local consumer bankruptcy attorney to provide a client a single contract for limited representation services (the Agreement and Consent to Limited Representation in Consumer Bankruptcy), and file the same with the court. The local Ethics Subcommittee emphasizes that the failure to follow any local rule will result in 9011 sanctions.

Retaining Your Income Tax Refund in a Chapter 13 Bankruptcy

The tax season is upon us when most Americans can expect a personal income tax refund. If you are presently in a chapter 13 bankruptcy, you may not be rejoicing at the expectation of receiving an income tax refund because your chapter 13 plan requires that you pay the income tax refund to your chapter 13 Trustee for payment to your creditors. If you are represented by the law firm of Charles J. Schneider, P.C., you would have been advised that the payment of the income tax refund would not necessarily reduce the length of your chapter 13 plan. Most chapter 13 plans propose to pay less than a 100% dividend to unsecured creditors, therefore, the payment would only increase the dividend to your unsecured creditors and not reduce the length of your plan. You are committed to pay both the sum confirmed as well as the sum paid for the length of the plan "whichever is greater". If you are a client of the law firm of Charles J. Schneider, P.C. you almost certainly were advised that a chapter 13 plan is modifiable. The payment of the income tax refund is one of the terms which may be and is quite often modified for extraordinary purposes.

Retail giant RadioShack files for Chapter 11

As some business owners can likely attest to, staying afloat can be challenging, especially in today's uncertain economy. In order to survive, companies must always be turning a profit. One bad business deal or mismanagement of finances can cause a company's profits to crash. When this happens, business bankruptcy may be the best option.

Many Michigan residents have shopped for electronics at the retail giant RadioShack. However, it has long been predicted that the company would hit hard times as a result of online competitors. Well, the company, which has been around for 94 years, is now facing these hard times and has filed for Chapter 11 bankruptcy.

How do Chapter 7 and Chapter 13 bankruptcy differ?

Many Michigan residents likely have some idea of what bankruptcy entails. Most understand that bankruptcy is an option for those who need escape from a desperate financial situation. However, that is often where a person's understanding of bankruptcy ends. Sometimes, the many details involved in filing for bankruptcy can prove to be a mystery. One facet of bankruptcy that some Michigan residents may not be aware of is the difference between Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 and Chapter 13 bankruptcy differ in one major way -- income level. Only those who are under a certain income level are able to file for Chapter 7 bankruptcy. For those who do meet the income criteria, Chapter 7 bankruptcy is more basic and less time-consuming than Chapter 13. However, those who file for Chapter 7 are often unable to retain possession of certain property.

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