When Is It Too Late To File For Bankruptcy In Michigan
You are being foreclosed. Garnished. Sued.
Behind on the car payment.
Dont be afraid, like the chicken in the picture, to talk to an attorney.
BEFORE something happens.
A notice is published, virtually always in the Legal News, for four consecutive weeks with the sale date.
The notice is also posted on your house and/or mailed to you.
Or, judicial, in which case you are served with a complaint and summons that have been filed in the circuit court for the county in which you live.
Bankruptcy stops ALL collection actions, in their tracks.
So, if you file any chapter bankruptcy BEFORE the foreclosure sale date, the sale is stopped.
If you file during a judicial foreclosure suit, the suit is stayed, or stopped.
If the sale already took place, or the foreclosure suit judgment against you has been signed by the judge, too late.
A creditor lawsuit for money is stayed just like a judicial foreclosure suit, stopped wherever it is.
If not filed yet, it cannot be. If filed, no further action can be taken by the creditor against you.
But, if the judgment was already signed by the judge, you lose. This does NOT help the creditor though, because execution on that judgment is stayed by the filing of bankruptcy.
Unfortunately, Michigan allows wage garnishment.
DO NOT BELIEVE COLLECTION AGENCIES!
There can be no garnishment until after there is a judgment against you.
Up to 25% of take home pay can be garnished.
Speak With A Denver Bankruptcy Law Firm Today
Being sued is stressful and can result in your property being seized out from under you, but in most cases bankruptcy can help. This is because bankruptcy can wipe out your liability for the debt and stop any further collection against you, regardless of whether you have been sued already or whether there is a judgment against you, or even whether your wages are already being garnished.
If you are planning to file for bankruptcy, a lawsuit should not cause any problems, though it may speed up the time frame in which you want to file in order to avoid a garnishment or liens on your property.
In most cases, having a lawsuit filed against you by a creditor means it is a good time to have a free consultation with a bankruptcy attorney to explore all your optionsand the sooner the better. Most people wait too long to find out about bankruptcy protection, and it costs them. If you are served with a summons, its not too late.
Do I Have To Take Counseling Courses To File Bankruptcy
Yes, you have to take two: one before you file and one after you file. If you do not do this, your bankruptcy discharge will be denied and you will continue to owe your debts.We can give you more information about the cost and the companies that provide these courses which can be done by phone or over the internet. We have collected the names ofcompanies which charge the lowest fees and offer the best service.
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What Happens If I Sue Someone Before I File Bankruptcy
If you have a lawsuit pending against someone else, the lawsuit is considered an asset of your bankruptcy estate. The most common situation where this happens is for personal injury cases. The bankruptcy trustee handling your Chapter 7 bankruptcy will step in your shoes and take over the personal injury suit.
The federal bankruptcy exemptions and some of the states protect personal injury claims, at least to a certain amount. If youâre in an opt-out state and have a personal injury case against someone , make sure you speak to a bankruptcy attorney. Theyâll be able to explain how bankruptcy law may or may not affect your case. This is especially important if you have ongoing medical bills youâre hoping to pay with money from the lawsuit.
Your Wages Are Garnished
But just like each scenario weve discussed here, a garnishment can be stopped by filing bankruptcy and getting the automatic stay in place.
Your creditor may be entitled to what ever wages you have earned between the time the garnishment was served on your employer and the day you file bankruptcy. But gong forward, your wages are yours.
Bankruptcy law also lets you recover amounts your creditor got in the 90 days before you filed bankruptcy. Wait longer than 90 days, and you lose the right to reclaim the garnished funds.
Bankruptcy stops garnishments.
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You Could Be Neglecting The Real Issue
Most people in their 20s obtain that first real job and first grown-up apartment. In doing so they have to learn how to make the sacrifices required to live within their means. They are developing the skills and discipline required for becoming responsible, self-sufficient adults. Those who learn how to manage money during this time gain the ability to build the savings required to make a down payment on a future home, buy cars without the help of a lease or high-interest loan, and eventually afford the joys that financial freedom offers, such as frequent vacations or early retirement.
If you find yourself struggling with managing your finances, with your debt snowballing into more and more debt, the real issue is not where you are but how you arrived there. It could be that you have been spending beyond your meansbut there can be other causes, such as the widespread job losses brought on by the pandemic.
It’s important to stand back and figure out both how you got into your current predicament and what can be done to begin to climb out of it. Taking a second job for more income , debt consolidation, eliminating unnecessary spending, and paying down your debt little by little are all ways to help you readjust your finances and avert bankruptcy.
Are You Out Of Time
Youve given up on paying your debt and balances are piling up with penalties and legal fees. At this point, you dont see any hope in finding a solution to the debt, but you do have a business prospect coming very soon. There could be a significant amount of money coming up in the near future. You may hit it big with this next business venture and that would solve all of your debt issues. What good would it do for you to file for bankruptcy at this point? It would be easy to think that it is much too late to file bankrupt since you are almost out of the woods financially, but there are many compelling reasons you should know about that could change your mind about resolving your debt sooner than later.
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Pending Lawsuits A Bankruptcy Filing Wont Stop
The Bankruptcy Code does put certain limitations on the automatic stay protections. The types of civil lawsuits that continue even after a bankruptcy proceeding is filed include:
proceedings to establish paternity,
proceedings to establish or modify child support or alimony,
child custody and visitation matters.
A bankruptcy filing also doesnât stop criminal cases from moving forward.
If You Anticipate Having New Debts Soon
It’s a good idea to hold off on filing for bankruptcy if you foresee other significant expenses in the near future. As a general rule, Chapter 7 bankruptcy only erases debts you have as of your filing date. Debts that come along later will be yours to deal with, sometimes for years to come. For example, if you will be having knee replacement surgery in the next year and you will have to pay some or all of the expenses, those expenses will be wiped out if you wait to file for Chapter 7 bankruptcy until after your surgery.
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File Before Using Your 401k And Iras
Money in 401k and IRAs is generally protected in a bankruptcy proceeding. They are funds that can be used to give you a head start in recovering financial stability.
Unfortunately, we see many clients who access these funds to pay debts that would be dischargeable in bankruptcy. In many cases, debts are not completely cleared or only monthly payments are made.
When the retirement funds are gone, the clients have still had to file bankruptcy to finish the job of clearing the debts. They gained nothing for the loss of those protected retirement funds.
Do You Qualify For Bankruptcy
Bankruptcy for individuals has two forms the chapter 7 and chapter 13. Each chapter has specific monetary qualifications you must meet. Chapter 7 is for people who cant afford to settle their bills. You must earn less than your states median income for similar family size as you.
If the income exceeds the median income, then you can attempt to pass the mean test where the court trustee will look at your reasonable expenses and income to see if you can pay the bills or need the relief offered by chapter 7 bankruptcy.
Chapter 13 bankruptcy is commonly referred to as the wage earners bankruptcy as it requires that a person have unsecured debts and a steady income source of not more than $1,184,200 and income less than $394,725.
Bankruptcy affects your credit score and remains on the credit report for 10 years for chapter 7 bankruptcy, while it remains in your credit score for 7 years in case of chapter 13 bankruptcy. Your name goes into the public record and appears in legal notices in newspapers and can be read on media like radio and TV. Co-signers can be on the hook for that debt for chapter 7 bankruptcy, but dont get pursued in case of chapter 13 bankruptcy.
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Are You Eligible To File Bankruptcy
Some judgments are not dischargeable in bankruptcy, meaning your judgment will not be erased if you file bankruptcy. Non-dischargeable debts might include:
- Child support
- Government-owed debts
If you file bankruptcy and owe on a non-dischargeable judgment, you will still be liable for this debt after the bankruptcy case closes. The only exception is if they are paid in full through a Chapter 13 plan.
Filing For Bankruptcy Before Foreclosure
But what if you file for bankruptcy before foreclosure? This is the option most people use because it eliminates a lot of the hassle of dealing with a deficiency lawsuit.
There are also tax ramifications based on when you file. If you file before foreclosure and your lender cancels the deficiency, it might need to be reported on your tax return as income. In the example above, youd be forced to pay tax on $50,000. Thats a significant tax burden no matter your situation. This varies from situation to situation and there are exceptions, but its important to understand your risks. The last thing you want is to resolve your current financial situation only to end up with a huge tax burden you cant afford.
Whether or not you should file for bankruptcy before foreclosure proceedings begin depends on several factors, including how much you owe on your mortgage and the value of your home. Your attorney will help you decide whether a deficiency judgment should affect when you file and help you figure out your next best step.
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Filing Bankruptcy Before Or After A Judgment
If you file a petition for bankruptcy before a judgment is issued, the automatic stay will stop the lawsuit immediately. And you will avoid destroying your credit score further. It’s the best way to deal with a judgment if you plan to file bankruptcy. This is important because once a judgment is filed, it becomes a lien. Filing bankruptcy can discharge the debt. But it will not get rid of the lien.
Dealing With A Deficiency Judgment
Deficiency is the difference between the sale price of your home at auction and the amount you owe on the mortgage. For example, if your home is sold at a foreclosure auction for $100,000, but you still owe $150,000 to your mortgage lender, the deficiency is $50,000. Some states place limits on deficiencies, but in general, youre dealing what any money you still owe out-of-pocket that you dont get in the sale.
Mortgage lenders can sue you for the deficiency and Florida makes it relatively easy to do so. Granted, theres still a legal process and they need to receive a judgment in their favor before they can force you to pay, but chances are theyll be successful and youll be on the hook for the difference. Youre now looking at tens of thousands of dollars in debt that you owe and you no longer have your home.
You can learn more about deficiency judgments in Florida here.
The good news is that bankruptcy discharges your deficiency debt. Since there is no property to back it up, deficiency debts are unsecured. This means they are part of a Chapter 7 bankruptcy discharge. Once bankruptcy is complete, the lender can no longer legally attempt to collect the debt.
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Bankruptcy To Pay Off Debt
If you are just trying to pay your debts over time for an affordable amount, then there is no real deadline other than to avoid an impending wage execution, bank levy or entry of judgment in a law suit.
The issue with judgments is that they can create a lien against any real estate you own and increase the cost of your bankruptcy because additional steps need to be taken to remove said lien after you file.
Paying Certain Creditors Too Close To Bankruptcy
A preference occurs when, within a certain time period before filing bankruptcy, while you are insolvent, you pay more than $600 in aggregate to one creditor and put that creditor in a better position than other creditors . For regular creditors, like a credit card company or a bank, the preference period is 90 days prior to filing bankruptcy. If the creditor is an “insider”, which includes family members, the preference period is one year prior to filing.
If you make any of these payments during the specified time period prior to filing, your bankruptcy trustee will have the right to go to the creditor and demand the money back, which can be sticky when the creditor is a relative.
Example. Joe owes Bank $1,500. He pays Bank $700 in a last ditch effort to pay it off. He can’t make his finances work, so he files bankruptcy 62 days after paying the $700. The trustee will likely demand that Bank turn over the $700 to the bankruptcy estate, which has no effect on Joe.
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Will Everyone Know I Filed Bankruptcy
The filing is not reported in most papers except those that publish legal notices. If it is reported in such a newspaper, it may be possible to find that information bysearching on the internet. But someone would have to be searching specifically for you. So, unless you tell someone, it is very unlikely they will know.
Can I File For Bankruptcy After A Lawsuit In 2021
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In a Nutshell
Absolutely. Whether youâve just been served with a lawsuit or already had a judgment entered against you, filing for bankruptcy protection can bring relief.
Written byAttorney Jonathan Petts.
Once a debt collection lawsuit is filed, itâs almost impossible to stop it. Your options are pretty much limited to:
fighting the lawsuit ,
settling or paying off the debt,
filing a bankruptcy petition
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What Is A Bankruptcy Trustee
The bankruptcy trustee in a chapter 7 is responsible for being sure you have filed correct paperwork and for selling any assets that you may have which are not exempt. Thelatter only rarely occurs. The chapter 13 trustee is responsible for administering your plan and making sure it follows the bankruptcy law.
When Are Multiple Bankruptcy Filings Abusive
The term abusive bankruptcy filing can refer to a Chapter 7 filing that doesn’t meet the means testthe qualification standard that determines a filer’s right to a debt discharge. But it can also describe a case filed by someone who inappropriately uses the bankruptcy process to evade a creditor or buy time in a collection action, such as a foreclosure or lawsuit.
Simply put, the court frowns on debtors who file with no intention of following through with the case. Repeat filers face the consequences for using such tactics, such as a lack of protection from collections or the denial of a discharge.
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