Keeping Tax Refunds in Michigan Chapter 7 Bankruptcy.

Keeping your Michigan tax refunds in a Chapter 7 bankruptcy is easy.

You can keep your Federal and State of Michigan tax refunds but only if your bankruptcy lawyer knows how to do it. One of the most common questions our clients ask around tax season is whether or not they will be allowed to keep their tax refund when they file a Chapter 7 bankruptcy.  Thousands of people in the greater Detroit area rely on their tax refunds to catch up on past-due mortgage payments, property taxes, and other bills.

Like money in a bank account, a tax refund is an asset which must be disclosed to the bankruptcy court.  In Chapter 7 cases, the Bankruptcy Court appoints a Chapter 7 Trustee to seize the debtor’s non-exempt assets.  However, the vast majority of our clients get to keep their tax refunds as part of their exempt property.  The Bankruptcy Code allows debtors to keep a certain amount of money they are entitled to, and this includes tax refunds.  The amount of tax refund you can keep could exceed $10,000.00.  Debtors who are married and file jointly could potentially double that amount.

Michigan is home to some of the most aggressive Chapter 7 Trustees in the nation, and they have figured out several clever ways of getting their hands on debtors’ tax refunds.  Although the law entitles most people to keep some or all of their tax refund, that protection is not automatic.  In order to keep your tax refunds in Chapter 7, your lawyer needs to file the proper documents with the court.  A good bankruptcy lawyer can help you get rid of your debt AND keep your tax refund.

Fast bankruptcy and tax facts:

  • The average Federal Tax Refund in Michigan in 2011 was almost $2,600.00.
  • The highest personal tax refund I protected in a bankruptcy case was almost $9,000.  It was the case of a single mother with three children.  She got to keep all of it.
  • If your lawyer doesn’t know how to protect it, the Chapter 7 Trustee may be able to take next year’s tax refund, too!
  • The IRS can actually tax you for debts settled for less than the full amount!  But…
  • …Debt discharged in a Chapter 7 bankruptcy CANNOT be treated as discharge of debt income, meaning you won’t have to pay taxes on it!

Chris McAvoy is a Michigan attorney who helps people with bankruptcy, family law, and estate planning. To find out more or set up an appointment, click here for contact info. Our attorneys help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Taylor,  Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, Westland, Garden City, Canton and the Downriver, Michigan area.

The Michigan Lady Bird Deed and Avoiding Probate

Ever hear of a Lady Bird Deed? It’s an odd name so chances are if you have, you remember it even if you aren’t exactly sure what it is or what it does. They are becoming a more popular estate planning technique in Michigan useful for transferring property to your heirs. When drafted properly, they simplify transfer of your real estate to your heirs upon death. While you can’t name a beneficiary to your house, this is as close as you can get.

How a Lady Bird Deed Works

A Lady Bird Deed, also known as an enhanced life estate deed, works like this. You transfer, by deed, a life estate in your house to yourself and identify benficiaries (legally known in real esate law as “remaindermen”) who will take the house upon your death. However, you are not locked in as you reserve the right to sell, lease, mortgage or change your mind.

Benefits of a Lady Bird Deed in Michigan

  • Lady Bird Deeds avoid probate. While probate isn’t as scary as most people think it is, probate will be avoided as the house will be automatically transferred to the named beneficiaries in the deed.
  • The property obtains the step-up in basis. Basically, the beneficiaries can sell the house on the death of the grantor and not pay taxes on the proceeds.
  • Not a transfer for gift taxes. Because the transfer is not complete until the death of the grantor, it is not a lifetime gift and not subject to gift taxes.
  • Not a Medicaid divestment. The Lady Bird Deed lets you keep your house as an exempt asset when you apply for medicaid assistance.
  • Does not uncap property taxes. Your property taxes will not be reassessed with this transfer. In fact, it isn’t even a reportable transfer to the city assessor.
  • Avoids Michigan Estate Recovery. Because this is a transfer outside of probate, a claim cannot be filed against the house for medicaid repayment.

Where the Name Came From

It’s kind of an odd name, isn’t it? The name came from President Lyndon Johnson who came up with this idea to transfer real estate to his wife, Lady Bird Johnson, and the nickname stuck.

Ready to talk? Contact us and set up an appointment. Give us a call at 313-291-0240.

Chris McAvoy is a  Michigan attorney who helps people with bankruptcy, family law, and estate planning. To find out more or set up an appointment, click here for contact info. Our attorneys help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Taylor,  Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, Westland, Garden City,  Canton and the Downriver, Michigan area.

 

photo by: aussiegall

How Long Does It Take To Get Divorced In Michigan

calendar 150x150 How Long Does It Take To Get Divorced In MichiganUnder Michigan law, there is a minimum amount of time from the date of filing the Complaint for Divorce to the entry of the Judgment of Divorce. If a couple is getting divorced without kids, there is a 60 day wait period and, if there are children, there is a 6 month wait in Michigan. The clock starts running upon the filing of the Complaint.

Typically, a divorce will be completed within these time frames only if the parties agree on everything. However, this isn’t typical. Remember, you are getting divorced for a reason and that lack of communication and understanding usually carries over into the divorce. Not always, but usually. A divorce can also be completed within the statutory minimums if a Judgment is entered by default.

Default occurs when a Defendant fails to appear, answer, or defend the divorce after they are served with the Complaint. After the wait period, the Plaintiff files a Motion for Entry of Default Judgment. It is served on the Defendant. At a hearing before the Judge, if the terms of the Judgment are fair and equitable, the Judge will grant the Judgment.

If  a case is settled early, the Judge can waive the waiting period if there is a showing of undue hardship or compelling necessity. Contrary to popular belief (even amongst divorce lawyers), it has nothing to do with the best interests of the children. Some examples may be an inability to keep missing work or moving out of state. A Judge makes the decision on a case by case basis and there is no hard and fast rule.

Realistically, a divorce in Michigan will take anywhere from six to nine months. If it is heavily contested, you can expect to have a trial scheduled and completed within a year as Judges have certain time standards to complete a divorce case.

Ready to talk? Contact us and set up an appointment. Give us a call  at  313-291-0240.

Chris McAvoy is a Taylor, Michigan attorney who helps people with  bankruptcy,  family law,  and  estate  planning.  To  find out more or set  up an  appointment, click here   for   contact info. Our attorneys help  people in Taylor, Allen  Park,  Southgate,  Lincoln  Park, Riverview, Trenton, Flat   Rock,  Wyandotte, Brownstown,  Belleville,  Dearborn, Dearborn  Heights, and  the  Downriver,  Michigan  area.

 

 

photo by: DafneCholet

When Can A Child Choose Which Parent To Live With

I want you 150x150 When Can A Child Choose Which Parent To Live WithYour child gets to pick the parent they live with in Michigan when they reach the age of 18. That’s when they are considered legal adults and no longer under the jurisdiction of the family law court. Think about it and it will make sense. Your child is not allowed to pick the school they go to, what doctor they see, or what they have for dinner but now they get to pick who has custody? That would cause chaos. As soon as Mom took away their ipod or grounded them, the kid would snap their fingers and declare that Dad now has custody.

In determining child custody in Michigan, the court must consider twelve best interest factors.  One of the factors is factor (i) which is reasonable preference of the child, if the court considers the child to be of sufficient age to express preference. It doesn’t have a specific age. It is really up to the judge.  Even if the judge considers the child’s preference, that choice does not determine the outcome.

Typically when it is appropriate to listen to a child, the judge will meet with the child in chambers for a private meeting. This is sometimes called an in camera interview. The judge doesn’t typically take testimony. On other occasions, the judge may have the Friend of the Court do the interview. The interviews in Wayne County, Michigan can be done by the Referee or the Family Counseling Unit. Every judge has their own procedures. It is the very rare case where a child actually takes the witness stand.

Quick practice pointer: Do not bring your child to speak to the judge unless you are specifically told to do so by the court. Every once in a while, a parent brings a kid to court because they feel they should have a voice in the matter. Do not do it. It makes the parent look irresponsible and manipulative. I don’t care how mature you think your child is. It’s a really bad idea.

Here are some ages that have some significance under Michigan law for minors. While none of these apply in custody or parenting time issues,  it’s possible these feed the confusion.

  • A minor can nominate a guardian at the age of 14.
  • A child can go to court to ask a judge for an order emancipating them from their parents at the age of 16.
  • A 17 year old will be prosecuted as an adult if charged with a crime.
  • Over 14 years of age, a child cannot be adopted unless they consent.
  • A 16 year old may ask for a parental consent waiver for an abortion.
  • A 16  year old may also drop out of school.

Ready to talk? Contact us and set up an appointment. Give us a call  at  313-291-0240.

Chris McAvoy is a Taylor, Michigan family law attorney who helps people with bankruptcy,  family law,  and  estate  planning.  To find out more or set  up an  appointment, click here   for  contact info. Our attorneys help  people in Taylor, Allen Park,  Southgate,  Lincoln  Park, Riverview, Trenton, Flat  Rock,  Wyandotte, Brownstown,  Belleville,  Dearborn, Dearborn Heights, and  the  Downriver,  Michigan  area.

 

 

 

Death and Discharge During Bankruptcy

irish countryside 300x183 Death and Discharge During BankruptcyIt’s not often that it happens but a debtor can die after their bankruptcy petiton is filed but before their discharge is granted. Unfortunately, this happened to one of our clients recently. I only knew her from working on her case with her but it still made me feel bad. While she passed on to a better place, she hired me to do a job and I intended to see it through.

Bankruptcy rule 1016 controls what happens when a debtor dies during the bankruptcy. It states:

Death or incompetency of the debtor shall not abate a liquidation case under chapter 7 of the Code. In such event the estate shall be administered and the case concluded in the same manner, so far as possible, as though the death or incompetency had not occurred. If a reorganization, family farmer’s debt adjustment, or individual’s debt adjustment case is pending under chapter 11, chapter 12, or chapter 13, the case may be dismissed; or if further administration is possible and in the best interest of the parties, the case may proceed and be concluded in the same manner, so far as possible, as though the death or incompetency had not occurred.

Death During a Chapter 7

If the debtor is in a Chapter 7 bankruptcy, the case can be finished up and the debts can still be discharged at the conclusion of the case. In every bankruptcy case, the debtor has to appear at a hearing called a Section 341 Meeting of the Creditors. At the hearing, the Trustee asks questions about the debtor’s financial affairs. If the debtor has passed, someone familiar with the debtor’s financial circumstances can testify. For example, a surviving spouse or the Personal Representative of the decedent’s Estate. The mandatory Debtor Education course would have to be waived by the court based on the “disablity” of the debtor.

Death During a Chapter 13

Chapter 13′s are different from a Chapter 7 as a 13 requires a monthly payment plan. If the debtor has passed and cannot make the payments, the Chapter 13 plan will obviously fail. There are a few possible outcomes depending on the case: The court could dismiss the case. No further payments are made and the debts are not discharged; the Estate could continue making payments or make a lump sum payment to satisfy the obligations if the bankruptcy court allows it; and,  there is also the possibility the court would grant the debtor a hardship discharge and allow the immediate discharge of the debt without the need for further payments. None of these options are mandatory and are decided on a case by case basis by the judge.

Why Bother?

The single best reason to continue the case after the debtor dies is to allow the heirs to inherit free of any claims of creditors. While heirs, a spouse, or a personal representative are not personally responsible for any of the debt of the debtor, the Estate may be. A discharge eliminates any possible claims of creditors on any assets.

Time is of the essence in a situation like this. The bankruptcy court will not wait forever for something to happen and may dismiss the case if action isn’t taken right away.

Ready to talk? Ready to talk? Contact us and set up an appointment. Give us a call at  313-291-0240.

Chris McAvoy is a Taylor, Michigan attorney and consumer bankruptcy  lawyer who helps people with bankruptcy, family law,  and  estate  planning.  To find out more or set up an  appointment, click here  for  contact info. We help  people in Taylor, Allen Park, Southgate,  Lincoln  Park, Riverview, Trenton, Flat  Rock, Wyandotte, Brownstown,  Belleville,  Dearborn, Dearborn Heights, and the  Downriver,  Michigan  area.

D also stands for:

 

 

 

photo by: Joopey