Bankruptcy Lawyers In Grand Rapids, Michigan

General Bankruptcy Information

Bankruptcy is a legal option that provides relief to individuals and businesses in serious financial trouble and provides some protection to their creditors within certain boundaries. For an individual, the bankruptcy process involves disclosing your assets and liabilities and provides limitations within which you are allowed to keep some, and in most cases, all property. If you exceed the limitations of property you are allowed to retain, the remainder is used to satisfy outstanding debts. Remaining debts not satisfied by unprotected assets – if any – are discharged, except certain types, such domestic support orders, debt obtained by fraud and most tax debt.

There are many reasons people need to file bankruptcy such as job loss, unexpected medical illnesses, divorce, or business failure. Bankruptcy is available for individuals to obtain a fresh start and to move forward without being shackled by overwhelming debt. Consulting an experienced bankruptcy attorney such as at the attorneys at Andersen, Ellis & Shephard will allow help you assess your legal options.

Bankruptcy law is primarily federal and administered by the federal courts. However, the various states’ consumer and commercial laws do play important roles in certain bankruptcy issues.

Bankruptcy is an option for individual consumers, businesses, farmers and municipalities. There are two major types of bankruptcies: liquidation and reorganization. Oftentimes,  an individual filing for a liquidation bankruptcy has a no-asset case where all of the property is allowed to be kept under the limitations provided for under the law and eligible debt is discharged without any property being sold.

Different Bankruptcy Types

Chapter 7 Bankruptcy

Chapter 7 is available to individuals and businesses and is referred to as a liquidation bankruptcy. Filing for bankruptcy protection starts the process known as the automatic stay where the bankruptcy court stops most collection proceedings against the debtor. A bankruptcy trustee will be assigned with the filing of the bankruptcy petition. The bankruptcy trustee is responsible for selling assets that aren’t protected under the exemptions (or limitations imposed by the law on the amounts of property you can protect) and distributing the proceeds to your creditors. Generally, creditors are not paid in full or anything at all. For individuals, most debts are discharged and no longer the responsibility of the debtor; however, certain types of debt survive the bankruptcy, such as alimony or child support. For a business debtor, the liquidated business does not survive the bankruptcy.

Reorganization Bankruptcy

A reorganization bankruptcy is more appropriate where there is ongoing income that can be used to pay creditors, at least in part. Reorganizations are governed by several chapters of the Bankruptcy Code: Chapter 11, Chapter 12, Chapter 13 and Chapter 9. Most consumer debtors will file Chapter 13 to reorganize. Chapter 12 is for farmers, Chapter 9 for municipalities, and Chapter 11 is for larger business entities and individual with high debt.

Filing for reorganization also generates an automatic stay of most collection activity. The debtor then develops a repayment plan to pay debts over a three- to five-year period through a bankruptcy trustee. If the payment plan is completed, the remaining debt is discharged and forgiven. If plan payments are not made, the Court could dismiss the case or the case could be converted to a liquidation case.

Involuntary Bankruptcy

In addition to bankruptcies filed voluntarily by debtors, creditors have a legal remedy through “involuntary bankruptcy” petitions under Chapters 7 or 11. Creditors can file a bankruptcy petition against a debtor to ensure that assets are distributed fairly among creditors through the bankruptcy process. This is uncommon as there are many pitfalls to creditors doing this.

Speak to a Bankruptcy Lawyer

Bankruptcy primarily benefits the debtor but sometimes there are advantages to creditors as well. If you have questions about bankruptcy in Michigan, you should schedule a free appointment with an experienced bankruptcy attorney at Andersen, Ellis & Shephard (formerly David Andersen & Associates, PC).