Can I File Bankruptcy in Michigan Without an Attorney?
Updated: 2 days ago
Deciding to file bankruptcy is a very important that has long lasting financial consequences. For many, filing bankruptcy will either eliminate debts or create a manageable repayment plan that allows a debtor to keep their property and possibly reduce other debts. Bankruptcy is complex, but it is possible to file yourself without an attorney. While low cost attorneys are a great way to go, not everyone can afford them and so filing "pro se" may be the only available option. This article outlines some of the main considerations and filing steps for debtors seeking to file bankruptcy in Michigan.
Initial Filing Considerations
Many factors may lead to or force a person into filing bankruptcy including debt payments that cannot be made. The purpose of bankruptcy is to provide relief to those who cannot afford to repay certain debts. When faced with the decision to put food on the table versus paying a creditor, at that point something had to give and bankruptcy should be seriously considered. Many people may feel that there is something wrong with them if they file for bankruptcy and creditors may push this feeling to cause a debtor to avoid bankruptcy. For many though, bankruptcy does provide a fresh start. If you are facing the loss of a home, car, garnished wages that harm your family or force you to miss rent payments, then you can either ask creditors for a payment plan or seek to eliminate debt through bankruptcy. The relief you feel after realizing that there are no more garnishments and old creditors to pay is worth the stress and temporary reduction in credit score.
Who Can File for Bankruptcy?
Both businesses and individuals can file for bankruptcy. Certain restrictions apply to business debtors that prevent a business entity from discharging debt and achieving a fresh start that an individual person may receive. Many small businesses, when shielding their individual owners from liability, do not actually file bankruptcy but liquidate under state law. This article focuses on actual people, but people who own a business may have additional complexities in filing.
Married debtors also must consider the implications of a joint bankruptcy filing. This added wrinkle of complexity may be good or bad for debtors with joint debt or jointly owned assets, and a bankruptcy attorney should generally be consulted in these more complicated cases. A bad decision could delay or prevent a debt discharge.
Filing Again Under Chapter 7
For individuals, there are restrictions on who can file if a previous bankruptcy was filed and if a discharge of debts was previously authorized by the bankruptcy court. If a debtor was granted a discharge of debts in a Chapter 7 liquidation bankruptcy filed within 8 years of filing the current bankruptcy case, a discharge in the current case will not be granted. Filing within 8 years could make sense if relief under the automatic stay is required, but debts will not be discharged under Chapter 7.
Filing Again Under Chapter 13
Another mistake a debtor who previously filed may make is filing a Chapter 7 case within 6 years of filing a Chapter 13 repayment plan case, then a discharge in the current Chapter 7 case may be granted if the Chapter 13 plan paid 100 percent of the unsecured claims or 70 percent of those claims and was the debtors best efforts. This restriction may require additional review of the previous Chapter 13 outcome.
Who Might Consider Filing Bankruptcy Without an Attorney?
While bankruptcy is complex, certain people may consider filing for bankruptcy if they do not know a low-cost attorney.
Debtors With Few or No Assets
Debtors who have few or no assets may face little resistance from creditors when filing for bankruptcy. Creditors cannot go after income earned after the bankruptcy filing, so without assets to sell, a debtor in this instance who has completed all the forms properly and made all necessary disclosures may have a successful outcome. The bankruptcy trustee will review the filing for accuracy to ensure there are no improper asset transfers or concealment, and if none such exists, the filing is likely to be approved by the bankruptcy judge. Debtors should also consider federal versus Michigan bankruptcy exemptions for assets.
Debts are Dischargeable
A main concern for debtors is whether the debts are dischargeable. If a debtor has no dischargeable debts, there is generally no point in filing a Chapter 7 liquidation bankruptcy. Filing Chapter 13 may make sense to reach a manageable plan to stretch payments out over time without fear of garnishment or creditor harassment. In many cases, there is a mix of dischargeable and non-dischargeable debt, and issues of priority. Creditors may argue that debt is non-dischargeable to attempt to collect after bankruptcy.
Debtor Seeks a Liquidation Bankruptcy
A debtor seeking to liquidate and achieve a fresh start after bankruptcy is a better candidate to file pro se. If a debtor wishes to keep all his or her property and use a repayment plan, then hiring an attorney is likely a better option. Data shows that most people who file a Chapter 13 bankruptcy themselves do not successfully complete it, resulting in creditors taking action against the debtor's property including garnishment, levies, etc.
Debtor Has Not Transferred Assets
For debtors who transfer assets prior to filing bankruptcy, this may draw scrutiny from the bankruptcy trustee, who could challenge the transfers if the trustee believes these transfers were either a fraudulent conveyance or a preference. Debtors who make transfers may benefit from seeking counsel to confirm how a trustee would typically handle these transfers or how to make a strong claim that they are not preferences that are subject to recapture and distribution to creditors.
Income Does Not Exceed the Means Test Limit
If a debtors income does not exceed the means test threshold, then the bankruptcy would qualify for Chapter 7 without further proof that there is no abusive intent on the part of the debtor. While this amount might be low, debtors who feel they do not have the means to afford an attorney to guide them through bankruptcy may have funds that were garnished that could be used to finance the bankruptcy filing.
Benefits of Filing Bankruptcy Using an Attorney
Filing for bankruptcy on your own is difficult, but not impossible. In 1999, the Western District of Michigan Bankruptcy Court reported that about 5% of all filers were pro se filers or debtors who were not represented by an attorney. This statistic was consistent for Chapter 7 filers.
Other issues include the result of an unsuccessful filing, which may require a debtor to delay refiling the petition or limit the ability to achieve a discharge of debt. Ultimately, some debtors forgo peace of mind to save a few hundred dollars and ultimately do not achieve their goal of a fresh start.
Attorneys Assist with an Effective Chapter 13 Plan
Attorneys can also help ensure that a Chapter 13 plan is reasonable and achievable. Chapter 13 repayment plans must be completed over a 3 to 5 year period to receive a discharge of debts that are not going to be repaid in full. Setting unrealistic goals or not having an attorney to assist when payments are missed can lead to creditors having the right to garnish wages and seize assets. Another issue that may arise is knowing when to convert a Chapter 13 case to a Chapter 7 case.
Avoid Time Consuming Paperwork and Guessing
Filing bankruptcy can be complicated depending on the facts. It is similar to filing a tax return. If you have questions about the process, forms to use, or proper disclosure of assets to avoid dismissal of your case, call a bankruptcy attorney for a free consultation. You may realize at that point that hiring an attorney to do the work is better, even if it costs you money. As mentioned previously, only 5% of filers go without an attorney. Having an attorney working with you each step of the way, including planning and reviewing qualification for filing, preparing the paperwork, working with the trustee on any follow up, and guiding you through the post discharge issues is worth the money.
Deciding to File Bankruptcy
The issues giving rise to bankruptcy usually involve past-due bills, creditor threats to garnish wages or levy bank accounts, and the possible loss of future sources of income like income tax refunds. If you expect to have other sources of income or resources to pay debts, filing bankruptcy may not make sense because the debts will not be eliminated. Instead, the court may direct you to use your other financial resources to pay debts. One option you should avoid is using your retirement account to pay creditors. Do not steal from your future self in that case to pay creditors.
Will Your Debts Actually Be Discharged?
The big question that must be analyzed carefully is whether your debts will actually be discharged. If not, filing bankruptcy does not make sense. In some cases, timing various debt payments or waiting to file as certain debts accumulate may help to eliminate dischargeable debt while using assets to pay non-dischargeable debts. Anyone considering bankruptcy should be concerned about finding themselves in a situation where they are using current resources to pay dischargeable debts while they are not repaying non-dischargeable debts. Of course, out of all debts child support should be paid, not only because it has the highest priority and is never dischargeable, but also because state law may provide for criminal penalties or suspension of a driver's license if child support payments remain unpaid.
Do Michigan Bankruptcy Exemptions Protect Assets?
Michigan bankruptcy law provides for exemptions for certain types and values of assets. Exemptions may protect a portion of the equity in a home, car, jewelry, household items, retirement plans, etc. Prior to filing, a debtor should carefully review all assets and determine if the bankruptcy exemptions apply and to what extent an asset may be protected. If an asset cannot be protected, a portion of the value may be retained by the bankruptcy estate (and debtor) after the bankruptcy is completed. Review exemptions prior to filing can help ensure that the desired assets will be retained. In many cases, a debtors entire assets may be retained following the bankruptcy. These are commonly referred to as a Chapter 7 "no asset" filing.
Debtors also should take care not to transfer assets prior to filing to avoid a trustee selling these assets. This type of action is called a "fraudulent conveyance" and a trustee will "claw back" the asset into the estate to sell and distribute proceeds to creditors. This type of action may also prevent a discharge of other debts, so debtors should take care to avoid the appearance of impropriety.
Review the Type of Filing - Chapter 7 versus Chapter 13
Knowing the difference between Chapter 7 and Chapter 13 is key for debtors planning for filing. Chapter 7 is a liquidation bankruptcy, where a debtor will not keep assets that are not protected by bankruptcy exemptions. Debtors may be able to keep a car or house, but not if they are behind on payments. In that case, a Chapter 13 "wage earners plan" would be better. Chapter 13, as that name implies, requires a debtor to have a regular income to qualify in order to make payments on the approved plan. Other restrictions may apply, but a debtor can keep all of his or her assets in a Chapter 13 plan, but must make payments to creditors. The payments may be a fraction of the amount owed, and the total amount to be repaid depends on whether debt is secured or unsecured, priority or non-priority, and the amount of income available to fund the plan.
Hiring an Attorney to Assist You with Your Michigan Bankruptcy Petition
If you need assistance to file bankruptcy, contact Detroit bankruptcy lawyer Andrew Steiger to assist you. He can help determine if bankruptcy will help you solve your financial problems, whether other options may be better, review likely outcomes from filing bankruptcy and answer other questions you may have. Contact him at (248) 259-6367 or email at email@example.com. For immediate assistance, fill out the form here. Deciding to file bankruptcy is not an easy decision, but if done properly, it can provide you with a fresh financial start.