File Bankruptcy And Keep Your Car

Do you even want to keep your car?

Before we figure out if you can keep your car, you need to determine if you even want to keep it. Bankruptcy gives you a fresh start and you can get out of bad decisions like that high interest car payment in to which you rolled negative equity. If you car is worth far less than what you owe, maybe it’s time to give it back to the creditor and walk away from. Bankruptcy is a great way to get out of a car loan and you not owe the lender a dime.

You can file for bankruptcy and keep your car. 

When you file for bankruptcy, you must list all of the property you own. This includes your car. But just because you own a car, that doesn’t make it an asset. An asset has value. If your car is worth less than what you owe, then your car is not an asset. You can value your car at the NADA website. A Chapter 7 Trustee is not going to seize your car and sell it to give all the money to the secured lender. If your car is worth less than what you owe, you can keep it if you want.

If you car is worth more than what you owe, it is an asset. Assets are protected by using bankruptcy exemptions. Federal bankruptcy exemptions currently allow you to have up to $3,775 in equity in your car. If your equity exceeds that, you can use up to $1,250 of the wildcard exemption plus $11,850 of any unused homestead. Don’t worry, it’s not as complicated as it appears at first. The bottom line is virtually all of my clients that want to keep their cars can. We will let you know if you don’t have enough exemptions to cover all of your property before you file your Chapter 7.

Reaffirming your loan.

If you have a loan, most lenders will require that you reaffirm the debt. A reaffirmation agreement reinstates the original loan contract. By signing a reaffirmation agreement, you agree to assume the personal liability that your bankruptcy would otherwise discharge. If you fail to make your payments after your Chapter 7 is final, your car will be repossessed and you will likely be sued for the deficiency. Once the reaffirmation agreement is signed, you are back on the hook for the loan.

Have more questions? Give us a call at 313-291-0240.

Chris McAvoy is a  Michigan attorney who helps people with bankruptcy, family law, and estate planning. 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.

Chapter 7 Bankruptcy Eligibility

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Chapter 7 Bankruptcy

Most people I speak with want to file a Chapter 7 Bankruptcy which discharges debt without a payment plan. It’s a fairly fast and inexpensive way to shed debt and get a fresh start. In most cases, it takes about three or four months from filing to finish and a lot of this time is spent waiting for the discharge order to come in the mail. 

Eligibility for consumer bankruptcy filers is initially determined by how much money is earned in the household. For a single filer (as of November 2016), if you are under $46,501 annually, you are eligible. For a house hold size of two, it is $56,651. Add a kid and its $67,342. If you have twins, the median income for a household size of four is $81,951. Add $8,400 for each additional person. To figure out your income, we will need your last six months of pay stubs and proof of all other income. If your income is less than the median income for your household size you can file a Chapter 7. 

Chapter 7 Means Test

If your income for your household size is greater than your median income level, it does not automatically mean that you have to file a Chapter 13. Instead,  you will do what is called the “means test.” This allows you to deduct certain expenses from your gross wages to get you under the median income. If you have enough deductions, you  can file a Chapter 7. If not, then you will need to file a Chapter 13.

I would like to stress that not every bankruptcy lawyer knows how to do the means test properly. If you are over income and would like to file a Chapter 7, it is critical that your lawyer knows exactly how to deduct every allowable expense. 

Any questions? 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.

Bankruptcy Discharges Back Taxes.

 

 Monopoly Income Tax Ver1

Discharging Taxes In Bankruptcy.

Contrary to popular opinion of my clients (and even some lawyers), income taxes can be discharged in bankruptcy and your refund can be protected. It’s true. Whether the money is owed to the Internal Revenue Service or the Michigan Department of Treasury, income taxes can be discharged in a Chapter 7 and Chapter 13 bankruptcy. If you meet all  the following  conditions,  you can discharge your back taxes in full.

3 Years Old:   The tax debt has to be at least three years old. More than three years have to pass between the date of filing and the date the tax return was due. Typically, the due date is April 15th of each year. However, if you filed for an extension for the tax year in question, the three years won’t start running until the due date of the extension. The date you actually filed the tax return doesn’t matter when calculating the three years. The due date controls, not the filing date.

2 Year Filing Requirement: The tax return must have been filed within the last two years. If you failed to file the return, even if the tax debt is more than three years old, you cannot discharge it. If the IRS files a tax return for the taxpayer, that doesn’t count. The tax filer must file the return themselves.

Assessed in the last 240 days: The taxes must have been assessed or determined by the IRS more than 240 days before the bankruptcy filing. For example, if your 2007 tax return is audited in 2010, you must wait until 240 days have passed from the latest date that the tax was finally determined. Tax assessments after the date of bankruptcy filing cannot be discharged as they are post-filing debts. Keep in mind that taxes based on fraudulent tax returns, trust fund taxes, or sales taxes are never dischargeable.

Not a tax lien. Once a tax debt becomes a lien on any of your real or personal property, it is a secured debt and cannot be discharged. The IRS will file the notice in either the county the land is or where the debtor lives depending on what property is being attached

Timing is everything. A mistimed filing that does not take into account all of these conditions will fail to discharge your tax debt. Sometimes, if possible given your circumstances, you may want to delay filing if it will insure wiping out old tax debt. Your bankruptcy lawyer should be familiar with these rules and help you maximize your debt relief.

Have more questions? 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.

 

Which Comes First: Bankruptcy or Divorce?

Chicken or egg?

Which Comes First: Bankruptcy or Divorce?

It’s all about timing. When considering a bankruptcy and a divorce, should you file the bankruptcy before, during, or after the divorce? Filing bankruptcy before a divorce can make both less expensive and maybe even less complicated.

Divorce and the Automatic Stay

If the bankruptcy petition is filed during the divorce, the divorce action is stopped in its tracks by the automatic stay. All property of the debtors becomes property of the bankruptcy estate and cannot be divided up in any property settlement until either the bankruptcy is over or permission is received from the bankruptcy judge. This automatic stay does not apply to child support, spousal support, or custody and parenting time but only to property division. While it may be necessary to file during a divorce, just understand it will slow down the process.

Costs of Bankruptcy and Divorce

Bankruptcy filing fees are the same whether you file jointly or individually. Also, most attorneys charge the same fees for either a single person or a married couple. Once the debt is gone, arguments about apportionment of debts between spouses is unnecessary which should lower your divorce costs.

Chapter 7 vs. Chapter 13

A Chapter 7 takes anywhere from three to four months to complete. It is an efficient, cost effective way to eliminate debt so it is a quick way to dump your debt without unreasonably prolonging your divorce.

If a Chapter 13 is necessary, consider holding off until after the divorce is over if possible as a Chapter 13 payment plan can be up to 60 months long. Most people don’t want to stay in a bad marriage until the plan is over.

Eligibility for Chapter 7

The income of both spouses is used to determine eligibility for a Chapter 7 bankruptcy. Sometimes, a person’s income would be too much to be eligible for a Chapter 7 if filing by themselves but if that would change if using all of the dependents in the home Other times, a couple has to file a Chapter 13 because they earn too much to do a Chapter 7. In that case, it may be necessary to file after a divorce. For example, if the eligibility for a two person household is $55,000 and both spouses make $35,000 each, they are not eligible to file a Chapter 7. However, since a single filer can earn up to $44,000, they filers would be individually eligible after their divorce.

Have more questions? 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.

Keep Your Car In A Michigan Bankruptcy

Keep or Surrender Your Car – That is The Question.

Most every bankruptcy filer in a Chapter 7 or Chapter 13 bankruptcy in Michigan is able to keep their car when they file for bankruptcy if they want to. Some people don’t want their car anymore. Maybe it is worth less that what is owed or the interest rate and payments are too high. Maybe it is a lemon and needs repair. The first decision is whether to keep or surrender the car. If you decide to give it back to the lender, any deficiency or amounts owed will be discharged in your bankruptcy. If you don’t want the car or can’t afford it, give it back.

Reaffirming the Car Loan

If you want to keep the car, most (but not all) lenders require the debtor sign a reaffirmation agreement. Reaffirming the debt keeps the contract going and, after the bankruptcy is over, the debt remains. If you fail to make payments and the car is repossessed, you are on the hook.

Redeeming the Car

Redemption is when the debtor pays the lender the retail value of the car in a lump sum. If the redemption amount is less than the amount owed, the unpaid balance of the loan is discharged. There are some lenders that offer redemption loans to do this. If the debtor and the lender are unable to reach an agreement on the retail value of the vehicle, a judge will decide it after a hearing.

How Much Equity Can You Have?

If your car is paid off or is worth more than what you owe, you must protect the equity by using a motor vehicle exemption. In Michigan, a bankruptcy filer may protect up to $3,675 in one motor vehicle when using the federal exemptions. If you need more, you can use any unused amounts of your wildcard exemption. A good bankruptcy lawyer will help you maximize your exemptions. A vast majority of our clients discharge all of their debt while keeping all of their things.

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