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Bankruptcy Cases in the News: Federal and State Exemptions

Bankruptcy Cases in the News

Federal and State Exemptions

     Under the Bankruptcy Court, a debtor may elected between two sets of exemptions in a Chapter 7 case, the Federal exemptions, or (in Michigan) the Michigan exemptions. Generally, the Federal exemptions give the greatest coverage of property to the debtor. Exempt property is property that the debtor gets to keep from creditors and the trustee, which forms the basis of his or her fresh start going forward.

     In certain interesting circumstances, however, the Michigan exemptions are more favorable to the Chapter 7 debtor and should be elected. For instance, under the Federal exemptions, exemptions about $42,000.00 in home equity can be exempted by a married couple. However, if the home is jointly owned as entireties property (husband and wife) either may file individually a bankruptcy and exempt their entire equity, no matter how great, from all individual creditors.

     That is because the historical purposes of the state law favors protecting an innocent spouse from the debts of his or her spouse to preserve their primary residence. This concepts has been explored and defined in several published court decisions. For instance, see: In re: Trickett, 14 Br 85 (Bank W.D. Michigan) 1981; and, In re: Grosslight, 757 F2d 773 (6th Cir. 1985).

     One of the keys to this relief is the absence of joint indebtedness. So, if the non-filing debtor is jointly responsible on some of the incurred debt, the trustee may argue that it should be allowed to administer the estate (sell the martital home) to the extent of the joint obligations. Still, this type of harsh relief must be examined on a case-by-case basis as noted by Judge McIvor in In re: Edwin Harlin, 325 BR 184, 189 (Bank E.D. Mich) 2005:

“As a general rule, courts have been very reluctant to apply 11 USC §363 (h) to allow the sale of entireties property owned by the debtor, and a non-debtor spouse. The case law is well summarized in Collier on Bankruptcy as follows: Disputes over the applicability of a section (h) to tenancies by the entireties have created the largest number of reported cases under section, perhaps because of the unique nature of the ownership interest, the variations among the states as to the nature of the interest and the rather draconian remedy that section 363(h) gives the trustee, contrary to the deep historical roots of the form of title, which is supposed to protect each spouse from the unilateral action of the other… Thus, although generally speaking property held by the debtor as tenant by entirety is subject to sale under section 363(h), courts have erected various obstacles to such sale.”

     This suggests, of course, that married couples should strongly consider never co-signing for the other and avoid all joint debt. Also, they might consider making sure to concentrate payments to reduce and eliminate joint debt as a priority over individual debt, in the ordinary of their payments.

     If you or a loved one are considering whether bankruptcy relief would be helpful for you, please make sure to consult a qualified debt relief agency/attorney. Guy Vining is available for a no-charge initial bankruptcy consultation and would be pleased to meet with you.

Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Part 2. What to consider in hiring your bankruptcy lawyer

Guy Vining, a bankruptcy attorney, in downriver Detroit, maintains his office in Taylor, Michigan where he serves the local communities of Monroe, South Rockwood, Newport, Carleton, Rockwood, Gibraltar, Brownstown Township, Woodhaven, Trenton, Southgate, Riverview, Wyandotte, Allen Park, Lincoln Park, Romulus, Dearborn Heights, Dearborn, Huron Township, Wayne, Westland and Ecorse. If you or a family member or a friend would like a no obligation no cost consultation / financial anaylsis, just call Guy Vining of Vining Law Group, PLC and we will pleased to schedule an appointment at your convenience.

In this part 2 of essentials of hiring your bankruptcy attorney or lawyer Guy Vining will further explain why it is important to select your legal counsel with care for bankruptcy and other matters. While there are literally hundreds of bill boards, yellow page and newspaper adds screaming stop foreclosure, stop garnishment, lowest prices, etc., etc. how do you really choose? How do you know? Is the lowest price really the best deal…and, what is fair value? As we saw in part 1 you must choose your bankruptcy attorney or lawyer with at least the care of purchasing a good suit or pair of shoes! It may take some shopping and an understanding that in the end we only ” get what we pay for ” whether for quality clothing or for legal services. However, since obtaining a discharge, debt relief and a fresh start are so essential to the commencement of the rest of your life Guy Vining respectfully suggests the following:

4.    Your bankruptcy attorney should use at least two fee agreements. At the Vining Law Group, PLC your first visit for an initial consultation is completely without charge. The first fee agreement from your bankruptcy attorney at the Vining Law Group, PLC will verify this. Specifically, the bankruptcy lawyer will sign a statement for your record and his that the first meeting does not create an attorney client relationship and is without any charge to you. This is your oppurtunity to get quality and free advice and to see whether your feel comfortable with the bankruptcy attorney. Afterall, an attorney client relationship is an important relationship which could span a bankruptcy alone or even many, many years. Guy Vining has dozens of clients that have done business with him for many years and have been so satisfied that they have referred many family members and friends for legal assistance.

5.    At the initial meeting all fees, costs and proceedures will be carefully explained to you. If you decide then or later to hire Vining Law Group, PLC as your bankruptcy attorney then a second and more detailed fee agreement will be prepared in writing which will guarentee to you and your family what the standard charges for services are. This document will outline what charges are for filing fee, required credit counseling courses, credit checks, and all standard services from filing to discharge. It is important to Vining Law Group, PLC that not only do you have a clear understanding of these obligations but also that there are no unpleasant financial surprises for you. Afterall, you have already had enough of financial problems!! Is some bankruptcy cases additional non-standard problems arise which your bankruptcy lawyer can not always anticipate. However, during your initial and subsequent interviews your bankruptcy attorney will attempt to guide that process and examine whether there may be some rough spots. If so, they will be discussed and all of your questions answered. The second fee agreement will be prepared to indicated what additional charges for court cost and attorney fees for your bankruptcy lawyer will be if such problems do occur.

When calling a prospective bankruptcy attorney or lawyer do not be shy. It is your case and your financial future. Make sure that you find out what their policies are in relation to attorney fees and other costs. Do they provide two written fee agreements for your protection as a consumer? Do they provide an initial consultation without a charge? In addition, make sure that during your initial conference that you discuss whether there are unusual features of your case which may require additional work for the bankruptcy attorney. If there may be additional work for the bankruptcy lawyer then get a clear understanding in wiriting of what the related charges will be. If you have any questions at all please free to contact bankruptcy attorney, Guy Vining