When facing a mountain of debt, it is easy to become increasingly overwhelmed and lose sight of the light at the end of the tunnel. The following are important tips to keep in mind if you are filing or considering filing for bankruptcy.

The Do’s

1. Do compile the information necessary for your bankruptcy attorney to begin working on your case. Gather income tax returns for the last two years, six months of wage stubs, title(s) to any vehicle(s) that you own, recorded deeds and mortgages, bank account statements, life insurance policies, retirement account statements, and any other information on your income and assets.
2. Do continue making payments on secured collateral that you intend to keep (e.g. you home and/or personal vehicle).
3. Do disclose to your attorney if you are expecting to receive an inheritance, insurance payment or any other that would enable you to repay your creditors. 
4. Do cooperate with your attorney. Make yourself available and timely respond to questions or requests for information.
   

The Don’ts

1. Don’t borrow from or withdraw 401k, IRA, and ERISA qualified savings and retirement plans to pay bills. Discuss this with your attorney promptly.
2. Don’t transfer property out of your name to avoid it being seized by creditors. Doing so may be considered fraudulent and may result in a denial of your discharge. 
3. Don’t pay back friends, relatives, or business associates money that you’ve borrowed from them. If you do this before you file for bankruptcy, these are considered preferential transfers and can be undone by the trustee (i.e., the trustee may sue your friend, relative or business associate to recover any money you gave them within one year of filing for bankruptcy). 
4. Don’t abuse the process. In the months leading up to your bankruptcy filing, don’t incur substantial credit card debt, in anticipation that you will discharge those debts in bankruptcy.  For example, debts for luxury goods or services incurred in the 90 days before your bankruptcy filing and exceeding $550.00 are presumed to be non-dischargeable in bankruptcy.
   

This is provided for informational purposes only and not for the purpose of providing legal advice particular to your situation. If you have specific questions or need help with eliminating your debts, contact our office today at 248-595-8617 to schedule a free, initial consultation.

Many of you may have read the book or seen the 1998 movie “A Civil Action” starring John Travolta as lawyer Jan Schlichtmann, an attorney who sues Beatrice Foods, Unifirst and W.R. Grace alleging the chemicals they released into the water supply of Woburn, MA caused a high incidence of leukemia in children. After settling the case against Beatrice, Unifirst, and eventually W.R. Grace for much less than the claims were estimated to be worth, and forgoing much of his fees and expenses, Mr. Schlichtmann filed personal bankruptcy. The EPA later concluded that Beatrice and W.R. Grace had contaminated the water supply but it was too late for Mr. Schlichtmann to recover further damages.

Skip ahead to 2001 and W.R. Grace is at it again, but this time it is was them that filed for bankruptcy, specifically under Chapter 11. However, W.R. Grace did not file because it was nearly broke, after all the current recession was seven years away, but to delay payment of the health care costs of plaintiffs who filed a large number of claims against its asbestos business. Those claims were not paid until 2008, years after they were filed and likely decades after the harm was caused. But fear not, W.R. Grace is back on its feet again; its shares up 76% in June 2011 compared with the previous year and it is now seeking court permission to enter a new financing agreement that would allow it to take advantage of its “substantial cash reserves” and increase its profit further. Business Chapter 11’s are the only chapter that allows, and even encourages, Debtors to make a profit at the expense of their creditors and W.R. Grace has certainly done so.

The Los Angeles Dodgers filed for Chapter 11 bankruptcy protection this week amid their owner, Frank McCourt's, turbulent divorce. Two months ago MLB Commissioner Bud Selig installed a financial overseer in hopes of preventing the team from going into financial ruin. Since that time Selig rejected a television deal that McCourt brokered with FOX that could have potentially allowed the Dodger’s to make payroll for June. The FOX deal was also structured to send cash directly to McCourt so that he could resolve personal problems through the vehicle of the Dodgers. Selig’s rejection of the plan also nullified the divorce settlement that McCourt had reached with his wife further personalizing McCourt and Major League Baseballs business relationship.

McCourt is taking a massive and unnecessary gamble by filing the Dodgers for Chapter 11 bankruptcy. As it stands, MLB rules allow for the league to seize the team in event of bankruptcy or inability to meet payroll. McCourt has been unable to secure financing for the Dodger for several months and as a result the team’s financial woes have reached a critical mass. Selig was poised to seize the team at the end of June when McCourt failed to meet payroll. Had Selig been allowed to take the team, MLB could have financed the Dodgers at relatively low interest rates just as it did with the Texas Rangers last year. McCourt would have still been entitled to contractual profits independent of other creditors’ claims. By filing bankruptcy in hopes of correcting his own personal problems, McCourt may have placed his head under the guillotine.

The fate of the Dodgers is now in the hands of a bankruptcy judge. Should the judge rule that McCourt is not fit to retain ownership of the team, he would then become a creditor in the same manner as all the players he stiffed. As a creditor McCourt would receive only a fraction of what he would have had he sold the team outright back to MLB. In addition, the new owner of the Dodger’s in bankruptcy, MLB, is not likely to do McCourt any favors when drawing up the reorganization plan. McCourt’s logic behind filing a Chapter 11 is further flawed in that the best case result of the bankruptcy would still put him and the team in a worse financial position than if he would sell the team. Should the bankruptcy judge accept McCourt’s proposed refinancing plan, the new creditors would have new senior liens on all Dodger’s property and the interest rate for the financing would be a burdensome 10% (as opposed to 7% if financed by MLB). Yes, McCourt would retain his named “ownership” in the Dodgers, but his assets would be so encumbered and his relationship with his franchisor so damaged, that it would be only a matter of time until McCourt was pried from the team once and for all. Oh, and did I mention that McCourt’s ex-wife will fight for half of everything McCourt is desperately clinging to? McCourt had two options, sell the team and resolve his divorce, or dig a hole so deep even the gopher from Caddyshack couldn’t get out. Well, I guess that gopher was hilarious right…

When filing for bankruptcy, being honest with your attorney is one of the most important principles to abide by. The importance of giving complete, accurate and truthful information cannot be overstated. If you do not tell your attorney the truth about your situation, he or she cannot properly advise you.

Below are a few tips to keep in mind, during your bankruptcy consultation:

1. When in doubt, ask. If you are not sure whether a piece of information is relevant or have questions about whether something is correct or should be listed on your bankruptcy petition, just ask.
2. Tell the whole truth. Bankruptcy is not the time to play hide and seek; it is your responsibility to disclose all of your income and all of your assets to the best of your ability. One consequence of failing to do this is a denial of discharge and this means that you will continue to remain liable for some or all your debts.
3. Reveal prior filings. If you, your spouse, or your former spouse has filed for bankruptcy in the last 20 years, let your attorney know. In most cases, this information must be listed on your bankruptcy petition.
4. Disclose prepetition transfers. It is your duty to disclose to your attorney any sale or gift of real or personal property, prior to filing bankruptcy. Failing to do so may lead to a denial of discharge, the loss of otherwise available exemptions, and criminal fines and penalties.  
   

Following these tips will help ensure your proceeding goes smoothly and will help avoid additional attorney fees and costs. For most honest debtors, the bankruptcy system promises and delivers a fresh start; if you are not honest, however, you put your financial future in jeopardy.

To learn more about bankruptcy, take a look at the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) Notices and the Bankruptcy Information Sheet.

If you need help with eliminating your debts, contact our office today at 248-595-8617 to schedule a free, initial consultation.

A recent publication (read it here) by the ACLU calls into question the public defender system, or lack thereof, for the indigent defendant in Michigan.  The Michigan Supreme Court has long struggled with how to administer the system and has settled on allowing each jurisdiction to develop its own system, requiring only that the jurisdiction submit a plan of how it will appoint counsel for an indigent defendant.  The result is a mishmash ranging by district and county from hiring the private firm that submits the lowest bid to do all appointments to having appointed counsel for a day to having attorneys sit in the courtroom and wait for their name to be called.  These systems are questionable at best when used to defend low-level misdemeanors and they are entirely inadequate when an indigent defendant is charged with a crime the conviction of which could result in spending the remainder of one's life in prison.  The right to counsel when charged with a crime is part of the Bill of Rights just like your right to free speech, to bear arms, and choose your religion.  Unfortunately the courts have eroded this right to such an extent that all that is required to represent an indigent defendant at trial now is a "pulse and a bar card" as we put it in our office.

Having "inherited" an appellate case in which the trial and appellate counsel were inadequate at best, and that resulted in a life sentence without parole for our client who was a juvenile at the time the crime was committed, I tend to agree with the ACLU on this one (I don't always, they did side with the Westboro Baptist Church after all).  As a practical matter, the ten stories in the publication have cost taxpayers millions of dollars in incarceration costs and wrongful conviction settlements.  The pamphlet is worth a browse; let us know where you fall on the issue.

You can find the whole booklet at www.aclu.org/files/assets/MI_failedjustice_bookletsm.pdf