Bankruptcy: How Long Does a Case Take?

If you’re considering filing for bankruptcy in Michigan, one of your main concerns is probably how long the process will take. The answer depends on several factors, including the type of bankruptcy you file, the complexity of your case, and how quickly you can provide the required information and documentation.

How long does a bankruptcy take?

Chapter 7 Bankruptcy Timeline in Michigan

Chapter 7 bankruptcy is often referred to as a “fresh start” bankruptcy because it typically involves zero payments to your creditors, with your general unsecured debts being discharged. The process typically takes around three to six months in Michigan, but it can be longer if your case is complicated or if there are any objections from your creditors or the trustee that would result in additional hearings or involvement in negotiations.

Here is a general timeline of the Chapter 7 bankruptcy process in Michigan:

  1. Initial Consultation with Lawyer: We have a meet and greet where we go over your assets, debts, income and expenses to determine the best path for you.
  2. Pre-filing Credit Counseling: Before you can file for Chapter 7 bankruptcy, you must complete a credit counseling course from an approved agency. This typically takes one to two hours and can be done online or over the phone.
  3. Filing Bankruptcy Petition: You must file a bankruptcy petition with the court, along with various schedules and forms that detail your income, expenses, assets, and debts. These will be documents that we complete on your behalf, based on documents and information you you provide to us. After these documents are drafted, we will review these together for accuracy and completeness, and sign them before they are filed with the Court.  Once filed, the automatic stay goes into effect, which stops most collection actions against you.
  4. Meeting of Creditors: About a month after you file your petition, you must attend a meeting of creditors, also called a 341 hearing. The trustee assigned to your case will preside over the meeting, and your creditors may attend to ask you questions about your finances. This meeting usually lasts about 10-15 minutes.
  5. Provide any Additional Documents (if requested): During the hearing the trustee may ask for additional documents. These are typical bank records, copies of checks, or proof of purchases or sales.
  6. Post-filing Counseling Course & Filing Fees: After you have provided everything the trustee needs, the last thing is to make sure you took your second course, and paid any outstanding filing fees to the court.

Chapter 13 Bankruptcy Timeline in Michigan

Chapter 13 bankruptcy is a reorganization bankruptcy that allows you to repay your debts over a period of three to five years. The process is more complex and takes longer than Chapter 7 bankruptcy, but it can be a good option if you have non-exempt assets you want to keep or if you’re behind on your mortgage or car payments.

Here is a general timeline of the Chapter 13 bankruptcy process in Michigan:

  1. Pre-filing Credit Counseling: Like with Chapter 7 bankruptcy, you must complete a credit counseling course before you can file for Chapter 13 bankruptcy.
  2. Filing Bankruptcy Petition: You must file a bankruptcy petition with the court, along with a repayment plan that details how you will repay your debts over three to five years. These will be documents that we complete on your behalf, based on documents and information you you provide to us. After these documents are drafted, we will review these together for accuracy and completeness, and sign them before they are filed with the Court. The automatic stay goes into effect when you file.
  3. Meeting of Creditors: About a month after you file your petition, you must attend a meeting of creditors, presided over by the trustee assigned to your case.
  4. Confirmation Hearing: About two to three months after you file your petition, you will attend a confirmation hearing, where the court will approve or deny your repayment plan.
  5. Repayment Plan and Discharge: If your repayment plan is approved, you must make payments to the trustee over three to five years. After you complete your payments, you should receive a discharge order from the court, which eliminates your dischargeable debts.

The length of a Michigan bankruptcy case depends on several factors, including the type of bankruptcy you file, the complexity of your case, and how quickly you can provide the required information and documentation.

Filing for bankruptcy can be a complex and stressful process, with many legal and financial considerations to keep in mind. One important issue to consider is the impact that filing for bankruptcy may have on your tax returns.

tax return refund and bankruptcyWhen you file for bankruptcy, it is important to make sure that all of your tax returns are up to date and filed with the appropriate government agencies. This is because bankruptcy courts require debtors to provide copies of their most recent tax returns to verify their income and expenses, and failure to provide these returns can result in your case being dismissed.

In addition, the timing of your bankruptcy filing can impact how your tax refunds are handled. If you file for bankruptcy before you filed your tax return, you may not know the exact value of your refund, leaving you unsure if you have enough in exemptions to protect your tax refund. This could result in part of your refund becoming part of your bankruptcy estate and subject to distribution to your creditors. However, if you file your bankruptcy after you receive your tax refund, you will make sure you keep accurate accounting of how you spent your refund.

It is also important to note that certain tax debts may be eligible for discharge in bankruptcy. Generally, income tax debts that are at least three years old and meet other specific criteria may be discharged in bankruptcy. So sometimes it might be worth holding off until after April 15th to file. However, it is important to consult with a bankruptcy attorney to determine your specific eligibility for discharging tax debts in bankruptcy.

If you are considering filing for bankruptcy and have outstanding tax debts, it is crucial to seek the guidance of an experienced bankruptcy attorney. Your attorney can help you understand how your tax returns and refunds will be impacted by your bankruptcy filing and can provide guidance on how to ensure that your bankruptcy case proceeds smoothly.

In summary, when filing for bankruptcy, it is important to ensure that all of your tax returns are up to date and filed with the appropriate government agencies. The timing of your bankruptcy filing can impact how your tax returns are handled, particularly in regard to any refunds that you may be owed. In addition, certain tax debts may be eligible for discharge in bankruptcy, and seeking the guidance of a bankruptcy attorney is essential to understanding how your tax returns and refunds will be impacted by the bankruptcy process.

Bankruptcy - Can I keep my Tax Refund?

For many of our clients, the annual tax refund they receive is a household necessity in order to pay for vehicle repairs, back rent, medical bills or child expenses. For that reason, we are often asked “will the court take my tax refund?”

Chapter 7

In a Chapter 7, you will be able to keep your tax refund as long as you have enough bankruptcy “wildcard” exemptions to do so.  As of today (12/29/2022), the Wildcard Exemption is maxed at $13,100. Meaning, an individual may keep up to $13,100 of their tax refund, or a couple may keep $26,200 … so as long as you are not using your wild card exemption for other assets.

Chapter 13

Whether you are able to keep you tax refund in a Chapter 13 will come down to your budget. Annually you may submit a request to retain your tax refund, and with that you will need to show whether your income has gone up or down, as well as what unexpected expenses you had. So for example, if you want to retain your tax refund to pay your utility bills, the trustee may reject your request if your budget already accounting for those bills. However, if you need to retain your tax refund to replace the brake pads, rotors and calipers on your vehicle, there is a higher likelihood that would be approved.

Have additional questions? Please contact us using the form below.

The Exact Documents Vary Case To Case, But Generally Speaking These Are The Documents We Will Need:

Have a question on what documents you need to file a Bankruptcy? Call us at 616-920-0555 or use the Contact Form below.

People often call in asking if their taxes can be forgiven in bankruptcy. And the answer is … maybe. Let’s dive in further.

In order to have your taxes forgiven, you must pass the 3/2/240 Rule:

3: Your taxes must have been due at least 3 years ago. So for example, your 2018 taxes are due April 15, 2019. That particular tax year passes the “3 rule” on April 16, 2022. Keep in mind here, if you filed an extension that year, making your taxes not due until October 17, 2019, then you would not pass the “3 rule” until October 18, 2022.

2: You must have filed your taxes 2 years prior to filing your bankruptcy. Now, YOU must have filed that return yourself. If the IRS filed a substitute return on your behalf, then you will not pass the “2 rule” per the bankruptcy code. In a situation where the IRS filed the tax return on your behalf, it’s not too late to then turn around and file your own return, and let the clock run.

240: The IRS must have assessed the income tax debt at least 240 days before you file your bankruptcy petition, or not at all. Assessed just means that the IRS is went through your tax return to make sure that everything is correct.

Also, your taxes will not ne discharged if:

Have a question on what tax debts can and cannot be forgiven in a Bankruptcy? Call us at 616-920-0555 or use the Contact Form below.

What debts can be forgiven in a bankruptcy? General Unsecured Creditors, and Secured Debts where you are surrendering the property.

General Unsecured Creditors:  The most typical types of General Unsecured Debts that are forgiven are:

Below are a list of unsecured debts that are not eligible for discharge:

Secured Debts where you are surrendering the property: So for example let’s say you have a secured home loan, but you owe more on it than it is worth. In a Bankruptcy you have the option to surrender that property, and have that debt be forgiven. This also goes for any vehicle loan, and any loan where there is a lien on a specific piece of property.

Now there is an exception to this rule. You cannot have any debt forgiven that was the result of fraud. The most typical example of this is when you lied on your credit application, or where you had no intentions to ever pay back a loan, or perform the service.

Have a question on what can and cannot be forgiven in a Bankruptcy? Call us at 616-920-0555 or use the Contact Form below.

Things are viewed as Black or White these days. It’s either left or right, good or bad, hot or cold … and so on. But that’s not how it should be.

Bankruptcy. Some people hear this word and immediately think it is bad. Yes, there are some negative aspects of it, but largely, the positives outweigh the negatives.

PROS

CONS

At the end of the day you need to decide what is best for you and your family. Ignore the stigma that is associated with filing for bankruptcy, because let’s face it, it is not nearly as bad as people think it is. Besides, only the people you want to know about your bankruptcy will be aware you even filed. Even though it is a “public record” the average person has no way of viewing said record.

With a Chapter 7 Bankruptcy, cases typically fall into one of two categories: Asset v. Non-Asset

An asset case is one in which the trustee finds that there are (1) unexempt assets, or (2) preferential or fraudulent transfers that can be undone. In there situations, there will be funds available to be distributed to the creditors.

With unexempt assets, typically the Debtor (person that filed for bankruptcy) will be able to choose between turning over the asset to the trustee, or paying the trustee an amount equivalent to it’s listed value. For more on what makes something unexempt, please view our bankruptcy exemption page.

With preferential or fraudulent transfers, typically the trustee will go after the person that received the property or funds, however, occasionally the Debtor will volunteer to pay the amount in order to protect the receiving party. This is common with family members or friends.

At the end of the day, what does this really mean for you? First off, if it is an “Asset” case then there is a chance that the Debtor or a family member will have to turn over property or money to the trustee. But secondly, if a case is ever an Asset case, then only those creditors that received a notice of the bankruptcy filing will receive a discharge.

So for example, let’s say that you owe money to ABC Phone company, but at the time of filing you forgot you owed them money so you never listed them as a creditor. If you are in a “Non-Asset” case, then at any point (whether your bankruptcy is open or closed) you can notify the phone company of your bankruptcy, and they have to forgive your debt. To the contrary, if you are in an “Asset” case, then you will need to amend your schedules and notify the phone company of your bankruptcy while your case is still open. If you fail to inform them until after your case is closed, then that debt survives your bankruptcy, and you will owe them that debt. See In re Madaj, 149 F.3d 467 (6th Cir. 1998).

Have any questions we can answer for you, or would you like to schedule a free consultation with one of our attorneys? Use our contact form below.

One of the most common questions we are asked is “How bad will this bankruptcy hurt our credit?!?”

And this question is valid. We leave in a society where virtually all home, car and even insurance decisions are affected by our credit score. So let’s unpack this question further.

I am not going to lie to you and say that a bankruptcy will not affect your credit score at all. Anyone that says that to you is lying. However, what I can say is that a bankruptcy is not a death sentence for your credit score. As with most things, time heals.

The first 1-3 months your credit score will drop. But that is when the rebound occurs. The further you move from your filing date, the less the bankruptcy will hurt your score. Surveying our previous clients, we find that those that came into our office with a score in the low 600’s, had their score rebound back into the 600’s approximately 12-18 months after filing. Those that came in with a credit score in the high 600’s had their score rebound back into the high 600’s approximately 18-24 months after filing.

What can you do to help your score rebound on the quicker side? Utilize credit responsibly. Get a secured credit card, and ONLY use that card for gasoline, and pay it off every month. Don’t use it for any other purposes, and never carry a balance at the end of the month.

What about getting a home loan? If you are looking to get a conventional mortgage, they will want you to be 24 months out of your bankruptcy and a credit score of 620 or higher.

What about a vehicle loan? Surprisingly, it will not be that difficult to get a vehicle loan. However, be prepared for a high interest rate the first year or two.

Something to keep in mind when looking into how a bankruptcy will impact your credit score, is that some creditors will actually view you to be MORE credit worthy after you file for bankruptcy. Why is this?

  1. They know your are now debt free, and you have more disposable income now to pay your debt, than you did prior to filing for bankruptcy
  2. They know that you cannot file a bankruptcy again for 8 years (if Ch 7 to Ch 7)

For creditors it is all about risk. The less of a risk that you are, the more likely they will want to loan you money.

When filing for Bankruptcy, you have to file the Means Test with the Court. This is a document that determines whether you qualify for a Chapter 7 Bankruptcy, or if you are filing a Chapter 13 Bankruptcy, whether you are in a 3 year or 5 year commitment.

For the Means Test, there is a chart that lists household sizes, and a corresponding dollar amount. And if your calculated annual income is under that dollar amount, you pass the means test. So the question becomes, “How many people are in my home?” This question is most common in situations where someone has joint custody of children, or when they are perhaps in college. Also, what if they are over 18 years old, or you have never claimed them on your taxes?

The Court takes a “heads on beds” approach. This means they follow the Census Bureau definition of household, which is “all the people who occupy a housing unit as their usual place of residence.” Since Congress never established an exact definition to help determine whether an individual qualifies, the real question becomes whether or not that individual relies on you for the majority of their support. So if you are talking about a college roommate, you will not be able to count them as a part of your household, for bankruptcy qualification purposes.

The law can be unclear, and nearly muddy at times. Do you have a question on whether someone should count as a household member? Reach out to us today at 616-920-0555, or use the Get Started Today contact form below.