Filing Bankruptcy in Michigan: What to Avoid and Expect

Many of our clients make some mistakes either before deciding to file bankruptcy, or before they come to our firm for help. It is important for debtors to be aware of certain bankruptcy laws regarding exempt assets, debt collection practices and bankruptcy procedures. Here you will find some of the most common things to watch out for and be aware of should you consider filing for bankruptcy protection in Michigan.

What to Avoid Doing Prior to Bankruptcy

Do Not Repay Relatives Prior to Filing Bankruptcy

Wait until after your bankruptcy has been filed to repay relatives. If you should repay debts to family members or other relatives within one year of filing bankruptcy, the trustee may try to collect it back from them.

Do Not Transfer Any Property to a Family Member

If any property is transferred to a relative within one year prior to filing bankruptcy, the trustee may recover it from them to repay a creditor. If fraud is suspected, the trustee may go back six years.

Do Not Borrow Money if Your Are Anticipating Filing Bankruptcy

If you are close to filing bankruptcy, do not borrow any more money. There is a presumption of non-dischargeablity for many debts for goods purchased within 90 days of filing bankruptcy, which means you will be held accountable to repay them.

Do Not Touch Your IRA or 401k

Assets in an IRA or 401k are generally exempt, so if you take money out in hopes of delaying bankruptcy, you will lose out on the option of keeping this money through bankruptcy protection.

Important Steps in Bankruptcy

Keep Making Payments on Secured Property You Wish to Keep

If there is any property you wish to keep, continue making payments. This includes cars, your home and any investment or rental property.

Consider Increasing Your Contribution to a 401k

Since this asset is protected, it is wise to add any excess income towards a 401k or other retirement account.

List ALL Assets

List all potential assets on your bankruptcy schedule. This includes any inheritance you are expecting, pending law suits, car on which your are cosigned, or anything else to which you may be entitled money. Also, if you are in your parents will for property, include this as a potential asset.

Be Honest on Your Petition

Because bankruptcy cases are audited, it is important to be completely forthcoming on your bankruptcy paperwork.

Amend Your Petition for Inheritance or Divorce Settlement

If, within six months of filing bankruptcy, you receive an inheritance or assets from a divorce settlement, make sure to amend the bankruptcy petition.

Keep Careful, Detailed Financial Records

It is important that you have clear, comprehensive records of all assets and debts.

Get Professional Advice

If you are considering filing for bankruptcy protection, talk to an experienced bankruptcy attorney prior to doing anything. You need to get sound advice regarding how best to file, how to keep as much property and money as possible, and how to best get a "fresh start". There are many costly mistakes that can be avoided by talking to a lawyer first. Those people who use bankruptcy protection correctly will find that it is often the only way to get back in financial control and begin rebuilding their credit.

More info: Michigan Bankruptcy Attorneys