Certified Consumer Bankruptcy Specialist
American Board of Bankruptcy Certification
Information in Michigan
When You File Bankruptcy
You can choose the kind of bankruptcy that best meets your needs
(provided you meet certain qualifications):
Chapter 7 – A trustee is appointed to take over your
property. Any property of value will be sold or turned into
money to pay your creditors. You may be able to keep some
personal items and possibly real estate depending on the law
of the State where you live and applicable federal laws.
Chapter 13 – You can usually keep your property, but you
must earn wages or have some other source of regular income
and you must agree to pay part of your income to your
creditors. The court must approve your repayment plan and
your budget. A trustee is appointed and will collect the
payments from you, pay your creditors, and make sure you
live up to the terms of your repayment plan.
Chapter 12 – Like chapter 13, but it is only for family
farmers and family fishermen.
Chapter 11 – This is used mostly by businesses. In
chapter 11, you may continue to operate your business, but
your creditors and the court must approve a plan to repay
your debts. There is no trustee unless the judge decides
that one is necessary; if a trustee is appointed, the
trustee takes control of your business and property.
If you have already filed bankruptcy under chapter 7, you may
be able to change your case to another chapter.
Your bankruptcy may be reported on your credit record for as
long as ten years. It can affect your ability to receive credit
in the future.
What Is a Bankruptcy Discharge and How Does It Operate?
One of the reasons people file bankruptcy is to get a
“discharge.” A discharge is a court order which states that you
do not have to pay most of your debts. Some debts cannot be
discharged. For example, you cannot discharge debts for–
- most taxes;
- child support;
- most student loans;
- court fines and criminal restitution; and
- personal injury caused by driving drunk or under the
influence of drugs.
The discharge only applies to debts that arose before the
date you filed. Also, if the judge finds that you received money
or property by fraud, that debt may not be discharged.
It is important to list all your property and debts in your
bankruptcy schedules. If you do not list a debt, for example, it
is possible the debt will not be discharged. The judge can also
deny your discharge if you do something dishonest in connection
with your bankruptcy case, such as destroy or hide property,
falsify records, or lie, or if you disobey a court order.
You can only receive a chapter 7 discharge once every eight
years. Other rules may apply if you previously received a
discharge in a chapter 13 case. No one can make you pay a debt
that has been discharged, but you can voluntarily pay any debt
you wish to pay. You do not have to sign a reaffirmation
agreement (see below) or any other kind of document to do this.
Some creditors hold a secured claim (for example, the bank
that holds the mortgage on your house or the loan company that
has a lien on your car). You do not have to pay a secured claim
if the debt is discharged, but the creditor can still take the
What Is a Reaffirmation Agreement?
Even if a debt can be discharged, you may have special reasons
why you want to promise to pay it. For example, you may want to
work out a plan with the bank to keep your car. To promise to
pay that debt, you must sign and file a reaffirmation agreement
with the court. Reaffirmation agreements are under special rules
and are voluntary. They are not required by bankruptcy law or by
any other law. Reaffirmation agreements–
- must be voluntary;
- must not place too heavy a burden on you or your family;
- must be in your best interest; and
- can be canceled anytime before the court issues your
discharge or within 60 days after the agreement is filed
with the court, whichever gives you the most time.
If you are an individual and you are not represented by an
attorney, the court must hold a hearing to decide whether to
approve the reaffirmation agreement. The agreement will not be
legally binding until the court approves it.
If you reaffirm a debt and then fail to pay it, you owe the
debt the same as though there was no bankruptcy. The debt will
not be discharged and the creditor can take action to recover
any property on which it has a lien or mortgage. The creditor
can also take legal action to recover a judgment against you.
IF YOU WANT MORE INFORMATION OR HAVE ANY QUESTIONS ABOUT HOW
THE BANKRUPTCY LAWS AFFECT YOU, YOU MAY NEED LEGAL ADVICE. THE
TRUSTEE IN YOUR CASE IS NOT RESPONSIBLE FOR GIVING YOU LEGAL