Bankruptcy Stops Garnishments In Michigan.

Bankruptcy Stops Michigan Garnishments

When you file for Chapter 7 or Chapter 13 bankruptcy in Michigan, the “automatic stay” stops all creditor collections. Creditors must stop all phone calls, letters, collections, harassment, lawsuits, garnishments, repossessions, and foreclosures. Sometimes a client gets a garnishment notice and is surprised because they didn’t even know they had been sued.

Michigan Garnishment Law

If living on a budget wasn’t tough enough, a garnishment makes it impossible. In Michigan, a creditor may garnish up to 25% of your tax home pay. But this is the most that can be taken from your paycheck. If you have three creditors garnishing at the same time, they cannot take 75%. They will have to share the 25% from your pay. Creditor can also garnish bank accounts on which your name appears and also your State tax refund.

Getting Your Garnishment Back

Once you file for bankruptcy, any garnishments taken in the prior 90 days can be recovered from a creditor if the total amount take is more than $600.00. For example, you have a weekly net pay of $400. A creditor garnishes your wages and can take $100 from each check. If you are garnished for four months, you will only be able to get back $1,200 (3 months x 4 weeks x $100.00) and not the whole $1,600.

These pre-petition garnishments is recoverable. Last year, we recovered over $20,000 in garnished funds and put it back in the pockets of our clients. If the process is done properly, the creditor usually complies without argument. Sometimes they don’t. When they don’t give it back we always take them to court. We just don’t back down on this. The creditor probably thinks it isn’t enough money for us to put the work in to get it back. They are wrong. Without exception we pursue the recovery of recoverable garnishments.

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

 

Tax Refund and Your Chapter 13 Michigan Bankruptcy

What happens to my tax refund in a Michigan Chapter 13 bankruptcy?

A Chapter 13 Bankruptcy involves a repayment plan that helps a debtor pay back some or all of their debt, on terms they can afford.  Any debt that is not paid by the end of the case is wiped out by the Chapter 13 Discharge. Keep in mind, I am talking about your Federal tax refund and not your State of Michigan tax refund. Federal tax refunds are considered disposable income in a Michigan Chapter 13 bankruptcy and are paid into your bankruptcy plan. Michigan tax refunds are not. You get to keep those without specific permission from the court.

Because a Chapter 13 Plan lasts between three and five years, a typical debtor will receive at least a few tax refunds during the case.  Generally, these tax refunds must be paid into the case for distribution to creditors.  However, there are several exceptions to this broad rule. You can modify your Chapter 13 plan to avoid paying your Federal tax refund to the Trustee.

100% payment to creditors avoid turnover.

First, if the debtor is paying back all of their debts, in full, through the Chapter 13 Plan, they will usually be permitted to keep their tax refunds.  The idea is that so long as all of the debts are being paid off, there is no reason to force debtors to give up their tax refunds and thereby pay extra.

Using tax refunds for unexpected needs.

Second, if the debtor has a problem come up that they need their refund money to deal with, the court may let them keep it.  For example, if the debtor’s furnace dies and they need to have it replaced, the court may allow them to keep their tax refund to pay for that expense.  If the debtor’s car needs repair, or they had higher than normal medical bills, or they need a down-payment for a new vehicle, the court may similarly let the debtor use their tax refund.  The court will not, generally, allow debtors to keep their tax refunds for normal expenses such as catching up missed mortgage or car payments, buying food and clothing, or paying property taxes.  Finally, it is important to understand that the court does not automatically let people keep their tax refunds for unusual expenses, the debtor must first file a motion seeking permission.

Bankruptcy and the IRS.

Finally, although the thought of giving up your tax refund probably leaves a bad taste in your mouth, finding out that you owe the IRS money in the middle of a Chapter 13 case is much worse.  Often, people planning to file Chapter 13 will reduce the amount withheld from their paycheck so that their tax refund will be smaller.  However, if they miscalculate and end up owing the IRS, they are often not able to pay, making their situation worse.

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.

 

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.

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.

 

How Long Does It Take To Get Divorced In Michigan

Calendar*Under 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.