While most couples do file bankruptcy together, there are some circumstances in which married couples might decide to file bankruptcy separately. In rare cases, such as newlyweds, for example, one spouse might file bankruptcy alone, which helps to preserve the non-filing spouse’s credit standing. However, certain aspects of the marriage will still be examined, so you should consult with an experienced

The “Means Test”

Even if only one spouse is filing bankruptcy, the entire income of the household must be calculated for the “means test” that determines whether or not you are eligible for Chapter 13 or if you should file for Chapter 7. While bankruptcy laws require that the household’s total income be calculated, the codes also allow for household members who are not filing to include their expenses for deductions, as well. The means test for bankruptcy is quite complicated.

Do You Have to be Legally Married?

The short answer is, yes. You cannot be in a common law marriage, and even if you have been living together and referring to each other as wife and husband for 20 years, you can only file a joint bankruptcy if you are legally married. Common law marriages are not recognized in Michigan, but even if they were, federal bankruptcy codes require a legal marriage for joint bankruptcy petitions.

Will Filing an Individual Bankruptcy Affect Your Spouse?

There are times when only one of the spouses carries the load of debt. Married individuals have the choice of filing bankruptcy jointly or individually, so if only one spouse has the majority of debt, it would make sense for only that spouse to file bankruptcy. If only one spouse files bankruptcy, only his or her personal information, such as a name and social security number, will show up on the petition, so the credit report of the non-filing spouse will not contain any mention of the bankruptcy. This is typically rare, however, in married couples.

Are There Benefits for Married Couples Filing Bankruptcy?

It costs a little over $300 for an individual to file either Chapter 7 or Chapter 13 bankruptcy. Married couples only need to pay this filing fee once, which essentially means that both people get to file bankruptcy for all of their debts for one fee, rather than two. This is typically true for legal fees, as well – married couples’ debts are consolidated into one case.

Are You Considering Filing Bankruptcy?

If you live in Michigan, are married, and you are considering filing Chapter 13 or Chapter 7 bankruptcy, you should contact a Michigan bankruptcy attorney who focuses on helping married couples and individuals deal with their consumer debts. Contact an experienced attorney at Resnick Law P.C.for a free phone consultation at (248) 642-5400. If you are in the Detroit area, you can call (313) 423-8320, and if you are in the Bloomfield Hills, call (248) 642-5400. We will evaluate your specific case meticulously and help you make informed decisions based on your unique financial circumstances.    

(image courtesy of Ryan Holloway)

Bankruptcy can impact many areas of a person’s life. After the bankruptcy is concluded, the person filing for bankruptcy has to recover financially and build up his or her credit again. This can make buying a home, renting an apartment, and even getting a job in some cases more difficult.

Not all jobs require candidates to reveal whether or not they have previously filed for bankruptcy. However, many jobs in the government that require security clearance, or in the financial sector where an employee may be required to handle money, are difficult to obtain if a person has previously filed for bankruptcy. In other fields of work, a prior bankruptcy filing will have no effect on a person’s employment prospects because it has nothing to do with the work the person will be doing.

In some cases, even when a person’s bankruptcy history is not requested on the initial employment application, it can be revealed through a mandatory background check. Bankruptcy information is also publicly available and reported on people’s credit report. Therefore, the bankruptcy information can still be seen on the credit report if the employer requests one on a prospective employee. Job seekers do not have to consent to the employer accessing their credit reports, but in most cases failing to give consent could be a reason for the employer to deny them a job.

For some employers, a past bankruptcy may signify irresponsibility. This is an arbitrary conclusion, especially for people who file bankruptcy due to unexpected expenses such as medical debt. If a candidate has a chance to explain the decision to file for bankruptcy, he or she may try to do so to mitigate the negative effects. The explanation is not legally required, but it may help because it may show the employer that the bankruptcy had nothing to do with the person’s ability to be responsible.

Employees who already have jobs cannot be fired solely for filing bankruptcy. Employees should be careful when handling issues related to their bankruptcy on company time, arriving to work late, or missing work because of the bankruptcy filing process. If an employee breaks employer rules, even if the breaking of the rules is related to the bankruptcy filing, the employer can fire the employee.

People who choose to be self-employed may not have the same concerns as those seeking formal employment from a business or organization. A self-employed person who has a history of bankruptcy may be affected by this history when seeking capital funding. In some cases, the person may have to provide collateral in order to get loans that other entrepreneurs may secure without collateral. In addition, the person may also be restricted from qualifying for some grants. Nevertheless, it is possible to start and flourish in a business after filing for bankruptcy.

Contact Us for Legal Assistance

Bankruptcy in some cases is unavoidable and necessary, but in some cases, people should consider other alternatives in order to avoid the consequences of filing for bankruptcy. If you are considering filing for bankruptcy, schedule a consultation to discuss bankruptcy, debt settlement, and other ways you can manage your debt. Call us at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan.

(image courtesy of Joshua Ness)

There are several reasons why Detroit faces such high rates of tax foreclosure. Many buildings have been over-assessed, according to economists, and counties are using outdated property values, which result in high tax bills.  Additionally, though the city offers a poverty exemption based on income, many city residents seem unaware or unable to obtain the tax break. As well, with some properties selling for as little as $1,000, the Detroit housing market often attracts investors who purchase homes, milk tenants for rent, then simply walk away from their properties.

While there have been mixed efforts in response to the city’s high foreclosure rate, like community groups buying some houses and deeding them back to the original families, or the city’s effort to reassess property values, the CLT model has become an attractive model for neighborhoods to pursue.

CLTs are nonprofit, community-based organizations designed to ensure community stewardship of land. CLTs can be used for many types of development (including commercial and retail), but are primarily used to ensure long-term housing affordability. The model is becoming increasingly popular across the country in response to speculation in urban real estate. It aims to keep buildings — whether rental housing, owner-occupied homes or businesses — permanently affordable.

With homeownership rates across the country down more than 15 percent from their pre-housing bubble highs, which have forced rents to skyrocket, CLTs have become increasingly popular.  From 2000 to 2011, the number of CLTs grew from 90 to 242, according to a 2011 study published by Vanderbilt University. In 2015, the Right to the City Alliance’s Homes for All Campaign, which works to fight displacement in cities throughout the country, worked with 12 organizations developing CLTs in 10 cities, including Detroit.

In 2015, a coalition of Detroit activists launched Detroit’s first CLT, buying 15 homes spread across the entire city versus in a concentrated area, like many CLT models. “We’re sort of doing it backwards,” Aaron Handelsman of the Detroit People’s Platform, one of the organizers of the CLT said in an interview regarding the CLT launch. Handelsman said, ideally, they would have been working with several families over many years before launching the land trust, “…but it was a situation where either they were going to lose their homes and get evicted, or give permission to Storehouse of Hope [to acquire their homes].”

The return of businesses and capital to Detroit, along with the resulting downtown and midtown building booms, have led to sharp increases in land acquisition, scarcity of Class A office space and increased rents for apartments and homes.

According to Community-Wealth.org, a nonprofit information website about CLTs, a typical CLT works as follows: For one to three years, families will pay rent equal to one-third of their incomes, while a CLT like Detroit’s Storehouse of Hope assumes the costs of repairs, property taxes, insurance and water bills.

Storehouse of Hope has said it also helps members interested in repurchasing their homes develop stronger credit in an effort to obtain a mortgage. The tradeoff of the CLT model is when a homeowner decides to resell their property, they must abide by sales caps. By placing limits on the amount of home equity one family can acquire, a CLT keeps its real estate stock affordable.

Governed by an elected board, CLTs are structured to ensure their policies accurately reflect the community’s vision. The makeup of a typical CLT governing board is a tripartite model: one-third of the seats are filled by members of the community; one-third of the seats are held by residents living on the land trust; and one-third of the seats are held by financial stakeholders invested in CLT’s mission.

As the city center and its surrounds continue to rebound and gentrify, Detroit’s neighborhoods are increasingly at risk of becoming detached from the city’s upward trajectory. CLTs offer neighborhoods not on developers’ radars the opportunity to stabilize and thrive.

When a person files for bankruptcy, “automatic stay” provisions come into play and most creditors must stop collection methods. Under a Chapter 7 bankruptcy, the debtor’s assets are collected by the trustee and sold to pay the creditors. Only “exempt” property is protected under a Chapter 7 bankruptcy.

Under a Chapter 13 bankruptcy, the filing party’s debts are reorganized and paid off in three-to-five years. The filing party keeps all property under a Chapter 13 bankruptcy; Chapter 11 bankruptcies are less common for individuals and are more complicated reorganization bankruptcy procedures for companies or extremely high net worth individuals.

To address some of the overlap between divorce and bankruptcy, the U.S. Congress passed revisions to the bankruptcy code, including The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which, as it relates to divorce, is that the automatic “stay” does not apply to spousal support or child support — so these will continue to be collected.

In addition, unsecured property settlement debts (debts owed to you by your spouse in your property settlement) are not subject to “discharge” in bankruptcy. When a debt is discharged, the creditor is legally forbidden to take any action “to collect, recover or offset any such debt.” (See Section 524 (a)(2) of the Bankruptcy Code.) The goal of most consumer bankruptcy cases is to discharge all debts, or as many debts as possible.

Financial support awarded in divorce decrees is a “first priority claim” that generally cannot be discharged. (Other examples of claims entitled to a priority are certain taxes, employee wage claims earned within 90 days before the bankruptcy filing, up to a certain dollar amount, alimony, etc.) Other debts that generally cannot be discharged include student loans.

Furthermore, your spouse’s filing for bankruptcy should not affect your right to receive wage garnishment for the support owed to you. Generally, your spouse’s filing of bankruptcy will not affect your collection of his or her past-due support, but under some bankruptcy plans the past-due payments may be discharged.

In some instances, your spouse’s filing of bankruptcy may be helpful as he or she will disclose income, real property and personal property when filing. You may be able to use property that was exempt from discharge to collect what support or property settlement obligations are owed to you.

A bankruptcy can, however, delay divorce proceedings. The State court handling the divorce will have no authority to make orders regarding marital property until either the bankruptcy is concluded or the automatic stay is lifted.

A money settlement is most likely to be property exempt from discharge in a bankruptcy if it appears to be a support arrangement, although with the passage of BAPCPA, it is generally no longer necessary to characterize money settlement as “support” in order to avoid discharge.

The court will look at the schedule of payments (one-time payment or installment payments), whether a major life event (like remarriage) affects the payment, whether there was a need for support, and other indicators that the payment was intended as support. Ultimately, the bankruptcy court is not bound by what you call the money settlement in your divorce.

A Difference of Note: Chapter 7 vs. Chapter 13 Discharge

Under Chapter 7 or “straight bankruptcy,” most debts are discharged, but there are exceptions: You may choose to continue making payments on your vehicle loan in order to keep that vehicle, so you might voluntarily choose not to discharge that loan. The kinds of debts that can’t be discharged in a Chapter 7 case are mostly the same kinds that can’t be discharged in a Chapter 13 “adjustment of debts” case, including child and spousal support, most student loans and recent income taxes.

However, there is one major kind of debt that can’t be discharged under Chapter 7 but can be discharged under Chapter 13: non-support divorce debts. So, if you owe a large amount of this kind of debt, you should seriously look into filing Chapter 13 bankruptcy instead of Chapter 7.

What are “Non-Support” Divorce Debts?

They are usually obligations in your divorce decree related to the division of property and the division of debts between you and your ex-spouse. As to the division of property, if in your divorce, your ex-spouse received fewer assets than you did, your divorce decree may have required you to pay your ex-spouse a specific amount of money to make up for the difference.

As to the division of debts, your divorce decree may have required you to pay certain debts so that your ex-spouse would not have to do so. This created a new and separate obligation by you to your ex-spouse to pay those debts, over and beyond your initial obligation to the creditor(s).

In a Chapter 7 case, your obligation to pay your ex-spouse the money to make-up for you getting more of the marital assets cannot be discharged — you would continue owing your ex-spouse that debt.

The divorce-created obligation to pay the designated debts would also not be discharged in a Chapter 7 case — you may be able to discharge your obligation to the initial creditor(s), but you would still be required to pay the debt(s) because of the requirement to do so in your divorce decree.

Discharged Only Under Chapter 13

However, both obligations to your ex-spouse, and all other non-support divorce debts, would be discharged in a Chapter 13 case. That’s part of the Chapter 13 “super discharge.”

That doesn’t mean that it could be discharged in a matter of months as in a Chapter 7 case. Rather, in a Chapter 13 case, it means non-support obligations would be treated like all other “general unsecured” debts. Outstanding non-support obligations would all be put into one pool of debt, and then to the extent you pay down that pool of debt is based on a number of factors, including:

• The amount of your other legally higher priority debts (such as back child or spousal support, recent income taxes and such), all of which must be paid in full before other debts are paid anything;
• The amount of the other “general unsecured” debts in that pool — the more other debts there are, the less your ex-spouse will receive;
• How much your plan must pay in administrative expenses: the Chapter 13 Trustee fees and whatever attorney fees you did not pay before your case was filed —which must be paid ahead of the general unsecured creditors;
• Whether your Chapter 13 plan lasts three years or five years — determined by your income when your case is filed, and;
• How much you can afford to pay all your creditors per month, now and throughout the length of the case.

As stated in the beginning, divorce and bankruptcy are complex and overlapping areas of the law. The best advice is to seek good counsel before undertaking either action.

For more information on bankruptcy and divorce overlap, contact Carina Kraatz at Resnick Law or call her at (248) 642-5400.

Bankruptcy may be the best option if your assets are quite depleted and you have multiple untenable delinquent accounts. But bankruptcy may not be for everybody, especially those whose jobs are at risk if they file bankruptcy (especially jobs in the financial sector).

In certain instances, debt settlement (sometimes known as credit workout) may be preferable to bankruptcy.

Debt settlement with attorney representation allows you to focus on a few accounts that are delinquent and are unlikely to be paid off by you in the near future.

For many people, debt settlement can often be a more targeted tool than traditional bankruptcy proceedings. Debt settlement allows your attorney to work with your creditors to accomplish the following outcomes:

• Reduce your current debt
• Lower or possibly even eliminate the interest rate on your current debts
• Lower or eliminate late payment fees and penalties

We tell our clients that they cannot accomplish these debt settlement tasks without the benefit of counsel. For creditors, a debt settlement means that they will eventually receive a larger portion of your accrued debt within a shorter time frame than if a bankruptcy were to be filed. This means that negotiating with your attorney will assure them (the creditor) a better and bigger payoff, sooner, so they are often quite ready to “deal” with your attorney.

Click here for our instructive video about this alternative to bankruptcy.

Divorce or the possibility of divorce is incredibly difficult. What happens if your financial house is also crumbling?

The answer is: it depends.

Many couples who are contemplating divorce and bankruptcy come to us to ask us what to do first: file for divorce or file for bankruptcy.

The answer, again: it depends.

Here are the factors that must be considered before proceeding:

• The earning potential of each spouse
• The current earnings of each spouse
• The debts that each person brought into the marriage
• The debts that they have incurred  since the marriage
• The estimated living costs of each spouse after the marriage
• Whether or not the spouses are in agreement about filing a joint bankruptcy
• If there is a time constraint for obtaining either a divorce or a bankruptcy judgment, as they can both delay the process of the other.

It is important to consult both family law attorneys and bankruptcy law attorneys if you find yourself in this delicate situation, as timing and taking the appropriate legal action in the correct order matter a great deal. In this situation, spending your money, limited though it may be, would be well-served on sound legal advice.

Photo by Dan Moyle

A person who owes you money is called a debtor. If your debtor files for bankruptcy protection, you may still be able to collect from them in certain circumstances.

First, identify how and why your debtor owes you money. Does your debtor owe you for a loan or a service that you provided to them? Do you have a judgment against your debtor? If you do have a judgment, is the judgment only against your debtor who has filed bankruptcy, or is the judgment against another individual or company?

Second, you need to know what type of bankruptcy your debtor is filing for. Are they filing a chapter 7, a chapter 13, or another type of bankruptcy?  Depending on the type of bankruptcy your debtor filed, there are different strategies that you can use in order to recover the money owed.

Your personal knowledge about your debtor can be helpful in developing a strategy for the collection of your debt.  Do you know what kind of income your debtor has? Do you know what kind of assets they have?  Does your debtor own their own business?

Once a debtor files for bankruptcy, it is important that you develop an ongoing strategy in order to collect any funds legally available under the bankruptcy code as soon as possible.  If you wait to take action, you might miss key deadlines, and your claim against your debtor’s bankruptcy estate may be barred by certain bankruptcy law.  Even if your debtor is a business that files for bankruptcy protection, you may be able to collect your debt.

At Resnick Law, we offer specialized legal help in crafting a legal way to collect the money you are owed. Please contact us as soon as the situation arises so we can act quickly to obtain what is rightfully yours.

In 2013, medical expenses were the largest cause of bankruptcy in the U.S., reportedly accounting for 62% of all bankruptcy filings.

Even more astounding is that most people who file bankruptcy based upon their overwhelming medical bills have some kind of insurance, albeit insufficient insurance.

These statistics predate the Affordable Health Care Act, and there are hopes that medical bankruptcies will abate; however some states like Oregon are noticing that medical bankruptcies are continuing apace even after the enactment of the ACA.

When a loved one is facing illness or surgery, the natural impulse is to sacrifice everything, including financial security, to improve their condition or even save their lives. When the medical bills arrive, many people will spend down their savings, tap into retirement plans and even max out credit cards to keep the medical creditors at bay.

Here are some things to consider if you have are facing overwhelming current or future medical bills:

1. Insure yourself to the highest level you can afford. When money is tight, you are always better off to be insurance-rich and cash-poor. If you have limited money, it’s better to have health insurance costs deducted from a paycheck, the most expensive that you can afford, to avoid co-pays, high deductibles and high participation costs. Dental insurance provided by employers and vision care plans can also be huge savings, depending on your typical costs.
2. When you receive a bill, look over it very carefully. Call the hospital or doctor if you have any questions. Because most bills are paid by a third party (the health insurer), there is very little incentive on the part of hospitals for medical bills to be accurate. A huge percentage of them have errors. We have seen a bill for a circumcision of a baby girl and two line items for the same surgical procedure. Nothing is impossible.
3. Deal with your bills, even if it’s painful. If you get a huge bill, one that you will not be able to pay either fully or on time, contact the creditor and tell them that you will pay part or when you will pay (underpromise!) and that you will be seeking financial help to pay for the bills. Make a small payment on time, to show that you are not completely delinquent.
4. Don’t tap into saving that you can’t replace to pay your medical bills. These include retirement funds and college funds.
5. Don’t pay off your bills with high interest credit cards.
6. Contact a bankruptcy attorney if you believe that you will never be able to pay off your medical debt, or if doing so will cause you to become delinquent in other bills. It is better to call a lawyer early in the process, as opposed to when you are deeply in debt.

Now, Bitcoin is embroiled in a new debate, as its value and its essence are being debated in bankruptcy court. Case No. 15-03011 is being argued in California’s  Northern Bankruptcy Court and centers around Marc Lowe, who is declaring bankruptcy.

The trustee of the California bankruptcy court is disputing the value of  3,000 Bitcoin that Lowe received.

The bankruptcy court has to determine not only the value of the Bitcoin, but even more significantly, whether the Bitcoin is currency or property. This determination will have a direct bearing on the assets that Lowe has and how the assets and debts are discharged.

In the world of bankruptcy, currency is valued at the time of possession, while property is valued based upon current value or the value at the time of transfer, whichever amount is greater. So, the Bitcoin’s value could either be what the Bitcoin was worth when Mr. Lowe took possession of it, or it could be worth what the Bitcoin was worth at the time of the bankruptcy filing, which was considerably higher.

A variety of federal entities vary in their treatment of Bitcoin. The Internal Revenue Service considers Bitcoin to be property, but the Securities and Exchange Commission considers Bitcoin to be currency.

For a more detailed analysis, please contact the bankruptcy experts at Resnick Law at 248.642.5400 or contact us online by clicking here.

General Requirements:

• All transfers of claim must include the claim number;
• Stipulations for Relief From the Automatic Stay must be signed by all interested parties (i.e., the Debtor, Trustee and any other party with an interest in the property) or a Motion to approve the stipulation must be filed.
• There is now an established procedure for Ex-Parte Motions seeking to redact protected private information; access to the pleading will be restricted while the motion is pending. A properly redacted replacement document must be filed within seven (7) days of the motion being granted.

Chapter 7:

• E.D. Mich. L.B.R. 4008-1 requires that a reaffirmation agreement be accompanied by a coversheet [Official Form B427]. A copy may be found by clicking here.

Chapter 11:

• Where the Debtor has filed a combined plan and disclosure statement, the deadline for an 111(b) election is seven days prior to the first scheduled date of the confirmation hearing.

Chapter 13:

• The Chapter 13 Plan Completion previously included language in the discharge order that “any pre-petition or post-petition defaults have been cured and the claim is in all respects current, with no escrow balance, late charges, costs or attorney fees owing.” That language has been changed to read, “…any pre-petition or post-petition defaults have been cured.”
• Section (a)(7) that provides the debtor is not discharged from any obligation on any continuing secured debt payments that came due after the last contractually due payment to which the trustee’s last disbursement is applied.