Why file Chapter 13 Bankruptcy

Why should you file Chapter 13 Bankruptcy in Michigan? It is a good idea if you have so much credit card debt and you don't qualify for chapter 7 bankruptcy.  One of the drawbacks is the cost of chapter 13 bankruptcies or the ability to refinance during a chapter 13 bankruptcies.

 Chapter 13 bankruptcy law is at times referred to as reorganization bankruptcy.  It’s uniquely different than Chapter 7 bankruptcy. In a Chapter 7 bankruptcy virtually all of your debts are extinguished. But, you must give up any belongings that aren’t exempt from seizure by your creditors. Under Chapter 13 bankruptcy law, you don’t have to forfeit any worldly property. But, you’re expected to utilize your income to pay off some or all of what you owe your creditors. Your payments to creditors are made over time, usually from three to five years. The time parameter hinges on the amount of your debts and income.

 People sometimes find it necessary to file bankruptcy again. The good news is you can file again; the bad news is you may want to wait a while. Under the new bankruptcy law, you can file a Chapter 7 bankruptcy eight years after you initially filed for Chapter 7.. You must wait four years to file for Chapter 13 bankruptcy again.

You can actually file for Chapter 13 even before the 4 year limit, but in this case you’ll have to pay back 100% of your debt over time. While this might not sound like an appealing option, it may be a useful approach for people attempting to save their home from foreclosure.

When Should You File

Whether to file bankruptcy is a personal decision that shouldn’t be taken lightly.  Should you decide to file bankruptcy you should be aware of the effects.  Here are some things to consider as you evaluate your financial situation.  You might file bankruptcy if:

 You wouldn’t be able to repay your debt within five years.

• You don’t have many assets or savings.
• Your wages are being garnished.
• You’ve had repossession.
• One or more of your debt payments are more than 30 days past due.

Chapter 13 bankruptcy allows you to keep your assets in exchange for setting up a repayment plan. An individual can file once every two years and the bankruptcy will appear on a credit report for 10 years.

Filing for bankruptcy will make loans more costly and may make unsecured loans impossible to obtain. Qualified retirement plan assets, such as 401(k)s, are protected under all bankruptcy filings, and assets of up to $1 million in IRAs are also protected.

In the end if you want to keep most all of your stuff you will file a chapter 13 Bankrutpcy. However, you work starts before you file by finding the right Michigan Bankruptcy Attorney. Fortunately for me when I filed Bankruptcy in Lansing I had done my research and met with several attorneys before I decided which one I would use. It was a pain but my attorney made me look at all aspects of bankruptcy before filing and this included an analysis of filing Chapter 13.

 

 

Deciding to file bankruptcy

Filing bankruptcy in Michigan

I will create a financial history post in a future post about Filing Bankruptcy in Michigan and I how I arrived at over 25K of Credit Cards and debt. I thought prior to being in my current position it was utterly ridiculous that someone would be so irresponsible or to quote myself" be so stupid to allow themselves to be put into this position". Yet the phrase of "judge not, lest ye be judged" comes to mind for me. I have not claimed bankruptcy as of yet. However, I am in the planning stages of filing for bankruptcy and this will be my diary of my experiences prior to bankruptcy, during bankruptcy and post bankruptcy. The wonderful thing about the Internet is the ability to research anything you want to do, and my decision to file bankruptcy is no exception. You get to find what property is considered exempt property when filing for bankruptcy. You will be able to conduct your own means test as it relates to bankruptcy and you can actually pull the legal documents needed prior to ever walking into a lawyers office. My thought is this, do all the research and collect every possible bit of information before I ever step into my lawyers office. I hope this makes filing easier. I also hope that this will let my lawyer know.. Hey, this guy is not an idiot and has done his research. That makes it harder for people to screw you over if you they suspect you have done your research. You are also required to take a finance or credit course prior to filing. I Intend to do this prior to meeting with my lawyer. However, if you do this prior to meeting with your lawyer the credit counseling certificate is only good for six months.

How I arrived that I needed to "File for Bankruptcy" as my only and last solution.

late 2007 I did an extensive audit of our financials( me and my wife's). Currently my wife does not work and we have 3 kids. We started our marriage focused on that a parent needed to be home to raise the kids. I make approximately 21.00 almost $22.00 an hour with no overtime available. The first thought you would think would be to have my wife go get a job? Yes, that would be nice except the cost of child care alone could put someone into bankruptcy ( yes, a little exaggerated, some truth in the statement especially if you"live pay check to pay check").

My audit consisted of taking an excel spreadsheet and collecting my bills and bank statements for a period of 6 to 8 months and writing everything down from how much we owed to the interest rate on credit cards to minimum payments. This can be a very humbling experience to look at this. Yes, you do know how bad things are mentally. However, you really get a reality check when you put it to paper or a spread sheet. A mental audit does no credit to cold hard numbers on paper. My audit consisted of breaking down exactly where the money is being spent along with a list of categories designating areas of spending for entertainment, grocery, vehicle, vehicle maintenance, cash pulled out of the bank, household costs and every area I thought should be classified.

I am including a snapshot of my spreadsheet minus the account numbers ( remember I have not filed yet).The first snap shot is of the due dates of all our bills. This is needed to gauge how much my paycheck is versus the amount going out for bills (minimum payments). Please note the tabs at the bottom of the picture to show you exactly what I looked at. The tabs include; "total debt", "Monthly spending detail", "Monthly budget", sort by "Total owed", sort of "highest APR ( annual percentage rate)" sort of "credit owner" ( me or my wife)

Now this is just the snapshot of the due dates. To me and my wife's credit(or kudos) prior to us filing we have maintained minimum payments and have rarely missed a payment on anything. We have never been late for a house payment and have never missed a house payment. When we started out we set up our house payment to be automatically deducted from our bank account. I don't like automatic deductions. However, you have to be in the mindset that you have to have a place to live. Granted because it was automatically deducted that does not necessarily mean that our bank account always had the money to pay the full house payment. At times it didn't, and we took the "hit" for the overdraft fee that came with an underfuned bank account. However, the house payment was made and shortly after the overdraft fee posted to our bank account I usually received a paycheck. So, our bank account was not in over draft for a long period of time.

Lastly, before showing more screen shots.. We have our house payment automatically deducted on the 15th of each month. I would say paying on the 15th really saved us because most bills are due on the 1st or during the first week of the month. I have shown you the spread sheet I created to look at my financial due dates. Looking at this spreadsheet makes me cringe and I am sure you will also cringe at the amount owed based on my income. Although I am not going to get into the history of how I arrived here( in this post) I will let you know that since I have been married I put myself through college( additional 20k debt) and raised my income from 13.00/hr to over 21.00/hr.

The psyche of the Credit borrower

The screen shot below is only a list of credit card debt.

The next screen shot will show total debt owed by me and my wife. One would think looking at this is enough to go ahead and claim bankruptcy. No.. we believe we did this and we should get our self out of debt. It's called responsibility! OK. So, we were irresponsible. I live in a 68k home, I have two vehicles worth about 5k a piece, a camper that is paid for. Which I assume I will have to liquidate(camper). However, what's the use in having a camper if you can't scrape enough money together to go camping. additionally, we have not taken a vacation in 5 years. I have 3 suits, my wife and I both have old cloths because any money or credit available (the credit cycle)is used to buy kids new cloths. We have concluded we were irresponsible.. although not on purpose. We got married in our yard, didn't go on a honeymoon to save money. The money from our wedding was used to pay off what little debt we had at the time and put new tires on the SUV.

Now ,we need to fix the problem. I looked a how to make money online. I found some sites to help generate additional revenue and I am working towards making additional income to try to fix our problem. Unfortunately, mitigating circumstance have pushed me to take action now. Before I get into that, here's a little philosophy and info from the bible. Granted, I am not a 'bible thump-er'. I do believe that their is a god that created everything.

I have been reading the bible from front to back for about a year in my spare time. One of many things that stick out is "debt forgiveness" that is in the bible and it says every 7 years(Deuteronomy 15:1-9). I presume that's where the U.S courts came up with only allowing you to file once every 7 years. However, one f the biggest bankruptcy issues that may preside in the individuals Psyche is "PRIDE". The bible states this as being a sin. I had never really considered pride a sin. However, Pride hurts us in so many ways. It will prevent you from saying sorry when you know your wrong. It will prevent you from associating or helping people you consider below your "social class" and yes PRIDE even plays a role in your decision to file for "bankruptcy".

The mitigating circumstances I recently dealt with was my health. I had not had a seizure in 5 years. I recently had one( two in one week) and was really out of it. It put me in the hospital for a week. The deciding factor to file for bankruptcy happened after my seizure. I was functioning but incoherent. My wife asked if I wanted to go to the hospital. I told her "No" She asked if I didn't want to go because of bills?? apparently I said yes. I barely remember this conversation. However, that was why I didn't want to go. What does this mean?? I placed money before my health and honestly, before my family ( what if I would have died?) who would take care of my family? I am the sole provider. This was the final straw. I would not hem or haw about filing or waiting to make extra cash to pay off my debt. The time was now. However, I am currently holding off on filing because of the hospital bills that will be arriving soon for my week plus stay in the hospital. Additionally, before filing I plan on pulling a free credit report to make sure we include all of our bills.

Looking at issues outside of filing for bankruptcy

I am proud that me and my wife never argued about money( well, argue to extremes) to the point that it would cause either one of us to want to walk away from our marriage. Both of our thoughts were.. we both got into this how are we going to get out. You should always be aware of what your spouse is spending and saving. If there is ever a surprise it's both your fault. I suggest you both get your credit reports yearly and review them together.. Your a team and both of you are ultimately responsible for your financial outcomes; good or bad. Likewise, if you are trying to decide if you want to ruin your credit by filing for bankruptcy.. Ask your self this question if you TRULY & HONESTLY believe you will be out of debt in 10 years.. If not, you need to seriously consider filing for bankruptcy and start rebuilding your credit. Hopefully by the time the bankruptcy drops off you will have established yourself with good credit. My total debt is listed below, BTW.. College loans will not or can not be removed during bankruptcy( unless health issues or significant hardship).

***NOTE** I am very secretive about how much I make and how much I owe around other people. Three people know I intend to claim bankruptcy. My mother, father and the World wide Web( I overcame Pride). Of course, natives of Michigan probably have heard of several people claiming bankruptcy in Michigan.

I look forward to the days when I will be able to finally save enough money to take my family on a vacation. I look forward to removing my status of living paycheck to paycheck and the day to day struggle. I look forward to freeing myself of debt to actually invest in my future and invest in my retirement. The interesting thing that creeps through my mind is I make too damn much to be this broke.

I am claiming bankruptcy in Michigan to invest in myself and family's happiness.