A debtor who has filed for bankruptcy should begin to see the benefits of that filing immediately after turning in the necessary paperwork to the court, according to Ed Gudeman, a bankruptcy lawyer in Royal Oak, MI, in practice at Gudeman & Associates, P.C. As soon as the debtor files the necessary paperwork with the court, he can discontinue making any unsecured debt payments immediately. At the same time, the bankruptcy court will send a notice to his creditors that he has filed for bankruptcy, and all harassing phone calls from those creditors, along with the debt collectors they have hired, should stop immediately as well.
Rather than using every spare penny to pay bills each month, debtors who have filed for bankruptcy can begin working towards a better future. Gudeman says that any and all foreclosure proceedings should be halted immediately, assuming that the home in question hasn’t already been sold. “Basically, [filing for bankruptcy] gets people their lives back, because now they can use whatever income they have to address their personal needs, but not necessarily with respect to their unsecured creditors,” he says.
Of course, not all bills can stop being paid once a debtor files for bankruptcy. Homeowners must continue to make payments on their homes if they want to keep them, assuming they are filing for a Chapter 7 bankruptcy. “In a Chapter 13, there is a one-month abatement, and in most cases they have to make a mortgage payment as part of their planned payment,” Gudeman says. When someone is filing for Chapter 13 bankruptcy, Gudeman explains that any arrears that the person is behind on would also be treated as part of the Chapter 13 reorganization plan, which is a major bonus to people who want to keep their homes.
With regard to vehicles, Gudeman says that debt collectors working for auto loan companies should stop calling immediately after the bankruptcy paperwork has been filed. A debtor can keep his or her car in a Chapter 7 bankruptcy just as long as he is able to bring the payments up to current status. After that, the debtor will be asked to “reaffirm” the debt to give the auto loan company an assurance that the debt will be paid back in full, even though the debtor is going through with the rest of the bankruptcy liquidation process. If a person who is filing for a Chapter 13 bankruptcy wants to keep his car, then any arrears on that purchased vehicle can be paid back over a period of 36 to 60 months, depending on the length of the debt reorganization payment plan.
The full effects of a bankruptcy won’t be seen until the process is completely over. Although that takes 36 to 60 months in a Chapter 13 bankruptcy, the bankruptcy process takes far less time in a Chapter 7 case. For a Chapter 7 bankruptcy, the entire process from the initial filing to the final discharge of the debt takes anywhere from 10 to 20 weeks in Michigan. “You file, all the collection activity stops, you go downtown for a 341 meeting—which is the meeting with the trustee that is also called a creditor’s meeting—and typically in a Chapter 7, you get discharged within two to five months,” Gudeman explains.
A bankruptcy lawyer should be able to explain all of this information to his clients so that they know what to expect each step of the way, according to Gudeman. “Basically, there should be a huge reduction in the stress of their financial situations,” he says. The people that Gudeman represents as a bankruptcy lawyer in Royal Oak frequently say that they are relieved to be out of their stressful situations, and that they are extremely pleased that they took the major step and filed for bankruptcy.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.