Understanding Chapter 13 Bankruptcy

Understanding Chapter 13Many of us have heard the term “Chapter 13 Bankruptcy,” but few have a complete understanding of what this type of bankruptcy entails.  Chapter 13 bankruptcy offers debtors an opportunity to identify certain debts and negotiate a repayment plan for them with their creditors over a specific period of time.  For those seeking a manageable solution for repaying some of their overwhelming debt, Chapter 13 may be a good option. Here is what you need to know about a Chapter 13 bankruptcy:

Chapter 13 bankruptcy involves repaying debt according to a plan.  By contrast, a Chapter 7 bankruptcy involves liquidating most of the debtor’s assets to repay creditors.  Chapter 13 allows the debtor to keep their qualifying assets while repaying their creditors.  Therefore, individuals who may be interested in filing under Chapter 13 may be those who have valuable assets which they would not be able to keep under a Chapter 7 bankruptcy.  Further, those who are seeking to avoid foreclosure on their home or repossession of their vehicle and want to negotiate a way to become current on their payments may prefer a Chapter 13 filing.  Chapter 13 also provides those who are not eligible to liquidate under Chapter 7 a chance at finding relief from their debt and an opportunity to financially recover.

Under a Chapter 13 bankruptcy, a debtor proposes a repayment plan for all of their qualifying debts.  The repayment plan will be specific in terms of indicating the creditors who will be paid and in what amount.  The amount of the debtor’s repayment will depend on several key factors such as the debtor’s available disposable income, the debtor’s sources of income, and the amount proposed to be repaid to the creditors.  After this information is gathered the debtor will be able to propose a monthly payment plan.  Once the bankruptcy court approves the plan, the debtor will be required to follow its terms for three to five years.  Once the plan term is completed, the debtor is ordinarily not obligated to repay what is left of their dischargeable debts.  However, during the repayment period, any extra disposable income must be devoted to paying any unsecured debts.

One benefit of Chapter 13 is that once your debts become part of the repayment plan, they will no longer continue to accrue interest or late fees.  Therefore, the amount owed will be what is included and approved under your filing and cannot increase beyond the date the debtor files.  Additionally, there are limits on the amount of secured debt and unsecured debt a Chapter 13 debtor may have.

Consulting with an experienced bankruptcy attorney will help you in determining if a Chapter 13 bankruptcy is right for your circumstances. We have the knowledge and experience you need to help you understand bankruptcy and your options. Please contact us online or by phone if we may be of assistance.   http://bestmichiganlawyer.com/contact-us

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Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy offers relief to some debtors which allows them to discharge debt and essentially start over.  This type of relief can be attractive in that it allows the debtor to rid themselves of burdensome debts which they are struggling to pay.  Specifically, for those with significant credit card debt, medical bills, and personal loans this type of bankruptcy may be an appealing choice.  However, it is important that someone considering filing for a Chapter 7 bankruptcy understand how it works.

A Chapter 7 bankruptcy allows the debtor to file for relief with a bankruptcy court, and have all of their non-exempt assets liquidated in order to pay their creditors.  The court will appoint a trustee to review your finances and other aspects of your bankruptcy and to oversee the liquidation and payment to the creditors.  You will be paid any exempted amount, but the net proceeds of the liquidation of your assets will go to pay creditors and the trustee’s commission.  At the end of the bankruptcy, all qualifying debts should be discharged leaving the debtor in the position of having a fresh start.

In Michigan, if you earn a certain amount of income, you must pass the Michigan means test in order to file for a Chapter 7 bankruptcy.   If your income is below a certain threshold, you will be exempted from having to pass this test and should be able to file under Chapter 7.  For those who must pass the test and are unable to do so, they will most likely have to file their bankruptcy under Chapter 13.

While Chapter 7 can provide welcome relief from unsecured debt such as credit cards and medical bills, there are certain debts which it cannot cover.  For instance, in Michigan, unpaid student loans, child support, some taxes, and debts related to criminal restitution are all debts which cannot be discharged in bankruptcy.

Chapter 7 allows the debtor to keep certain exempt assets during the bankruptcy.  Assets such as a house, car, or retirement accounts are usually exempt under Chapter 7.  The exemption of assets which are still being paid for means that you will continue to be obligated to pay for them just as before the bankruptcy.  But, when you claim these exemptions, you will have to sign something referred to as a “reaffirmation agreement” and be up to date on your payments.  What this agreement means is that you are identifying the debt which will be exempted and agree that the debt on these exempted assets cannot be discharged in bankruptcy for a certain number of years.

Chapter 7 offers a solution for those who are having difficulty paying their bills and cannot foresee being able to get out from under their debt.  For those whose qualify for this type of bankruptcy, there can be a fresh start free of debilitating debts and an opportunity to rebuild their financial health. Consulting with an experienced bankruptcy attorney will help you in determining if a Chapter 7 bankruptcy is right for your circumstances. We have the knowledge and experience you need to help you understand bankruptcy and your options. Please contact us online or by phone if we may be of assistance.  http://bestmichiganlawyer.com/contact-us

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Myths About Bankruptcy

For those who are unfamiliar with bankruptcy, it can be a confusing subject.   Often people assume that filing for bankruptcy will impact their lives in specific ways which may or may not be the case.  Here are a few common misconceptions about bankruptcy:

#1  Bankruptcy will Ruin My Financial Health

While it is true that filing for bankruptcy will impact your credit and will limit a person’s lending and credit options for approximately seven to ten years, many people who have filed for bankruptcy are still able to borrow money and rebuild their credit. In some cases, your credit scores may even improve following a bankruptcy.  Further, although your credit options may be less than before the bankruptcy, you may still be in a position to obtain a secure line of credit which can lead to improving your scores.  Your financial health can also improve in terms of discharging debt in bankruptcy.  Many people who file for bankruptcy are placed in the position of having a fresh start without the burden of their past debt.  From this position, it is possible to work toward financial recovery.

#2 People Who File for Bankruptcy are Irresponsible

For many people, bankruptcy becomes necessary when they are faced with large and unexpected expenses. For instance, one of the leading groups of people who have had to file for bankruptcy are people who have incurred excessive medical expenses due to major illness or injury.   Some other reasons people may find themselves in this position of needing to file are divorce, loss of a job, or the death of a spouse.  These and other life circumstances do not amount to fiscal irresponsibility.  Instead, rather than being financially irresponsible, many people who have had to file because they have simply found themselves in a position in life of needing relief from debt.

 #3 Bankruptcy Will Take Care of All My Debts

While the concept of bankruptcy may seem like an option which allows a debtor relief from all of their debt, there are certain debts which filing for bankruptcy will not relieve.  For instance, certain tax debts and student loans, and child support do not qualify as debt which can be discharged in bankruptcy.  However, in most cases, bankruptcy will allow you to discharge personal loans and unsecured debt such as credit cards and medical bills.

#4 It is Okay to Take Out A lot of Debt Just Before Bankruptcy

Those contemplating filing for bankruptcy may be tempted to go out and buy a lot of things on credit.  Although it would seem that adding to their debt under these circumstances would be harmless, bankruptcy courts tend to frown on this kind of behavior.   In fact, a court could find that debt assumed under these circumstances was fraudulently obtained and will therefore not eligible for discharge in bankruptcy.

# 5  Filing for Bankruptcy Means You Will Lose Everything You Have

Some people believe that when you file for bankruptcy, you agree to give up all of your possessions including your home, retirement accounts, and personal vehicle.   In most cases, the debtor is actually allowed to keep many of their assets.  Under a Chapter 7 bankruptcy, a debtor will have certain qualified exemptions from the process.  What this means is that certain assets such as their home, retirement account, and car will not be included in the bankruptcy process.  Likewise, under a Chapter 13 bankruptcy, the debtor often keeps many of their assets which are merely considered in terms of their value in calculating a repayment plan.

While the bankruptcy process can be a bit confusing and even mystifying to some, an experienced bankruptcy attorney can provide insight and advice which can bring clarity to the subject.  We have the knowledge and experience you need to help you understand bankruptcy and your options. Please contact us online or by phone if we may be of assistance.  http://bestmichiganlawyer.com/contact-us

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Your Medical Debt and Bankruptcy

 

Your Medical Debt and BankruptcyWith the rising cost of healthcare and the diminishing amount of coverage offered by health insurance policies, it is not surprising that one of the leading sources of debt for Americans today are medical expenses.  Depending on their health coverage, a person who has been seriously injured or suffered a catastrophic illness may be expected to pay tens of thousands of dollars from their own pocket.  Further, even those with less severe injuries and conditions may be facing insurmountable medical bills which places them and their family in the position of struggling to pay their other household expenses.   Fortunately, under most circumstances, bankruptcy can offer relief from medical debt.

In most cases, medical debt is treated as general unsecured debt and is therefore eligible to be discharged in bankruptcy.  The first step in determining how the bankruptcy process may address your medical debt is to determine which type of bankruptcy relief you qualify for and is best for your circumstances.  Chapter 7 bankruptcy offers an option which would allow you to discharge most or all of your qualifying medical debt.  Chapter 13 bankruptcy allows the debtor to repay their debt according to an agreed schedule and in many, cases allow for the discharge of some medical debt.

Chapter 7 bankruptcy requires that the debtor liquidate all of their assets which are not considered exempt from the bankruptcy and then use the proceeds to pay their creditors.  Once the debtor has used these funds towards their debts, the remainder of their debt will be discharged by the court.  There is no limit on the amount of medical debt you can discharge under Chapter 7.  For those with significant medical debt, Chapter 7 offers them the opportunity to have a new beginning free from their past medical debt.  This type of relief is a good option for many people, but they must meet certain requirements in order to qualify to file for Chapter 7.  Not all debtor will qualify for Chapter 7 relief, but there is another option which may be available through Chapter 13.

Chapter 13 bankruptcies involve the debtor entering into a payment plan in which they agree to pay their creditors over a period of years.  Your medical debt will be added to any other qualifying debt into one total amount.  Under the plan, each creditor will be paid a certain percentage of what you owe.  The timespan of the payment plan could be up to five years, and the plan will have specific requirements.  After the debtor has paid on their debts for the required time period and according to the terms of the plan, the remaining debts they may have will be discharged by the bankruptcy court.

Considering bankruptcy is an important decision which should be considered in view of your situation.  For those with significant medical debt, bankruptcy may offer much-needed relief from an overwhelming burden.  We have the knowledge and experience you need to help you understand your choices and determine the option which best works for you. Please contact us online or by phone if we may be of assistance.  http://bestmichiganlawyer.com/contact-us

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Seniors and Bankruptcy

As people enter their senior years there are often physical, mental, and financial changes which accompany aging and their circumstances.  Often seniors are faced with costly and unexpected medical expenses such as long-term care, which they find difficult to pay for from their limited incomes.  These expenses combined with the other bills of their household can leave many seniors in the position of being unable to get out from under increasing debt.  For those seniors in this situation, bankruptcy can offer relief from debt and the possibility of a new beginning for their retirement years.

Seniors who are in the position of considering bankruptcy are often those that have incurred unexpected medical bills.  Very few people are prepared for the medical complications which often accompany aging.  As such, when a person suffers a catastrophic illness or their health rapidly and severely deteriorates, the expenses associated with their care can quickly escalate well past their income.   This same group may turn to their credit cards as a means to pay for their medical bills.  As a result, these seniors find themselves falling deeper and deeper into high-interest debt with no means to get out.  Fortunately, in most cases, medical and credit card debt can be discharged in bankruptcy.  Therefore, for struggling seniors, bankruptcy can provide them with a way out of this endless cycle.

One concern that seniors thinking about filing for bankruptcy may have is how their social security and retirement accounts will be affected.  The good news is that, in most cases, a person’s social security pension benefit and qualified retirement accounts are considered exempt property.  What this means is that the bankruptcy will not include your retirement account and therefore creditors will not be able to access these funds to pay your debt.  This leaves the retirement account holder in the position of being able to discharge their eligible debts in bankruptcy while still being able to have their retirement income.

Another consideration that seniors may have is how their credit score will be impacted by their bankruptcy.  One of the main benefits to seniors is that during this phase of their lives, acquiring new major assets is not ordinarily a priority.  Therefore, while their credit score may be impacted by their bankruptcy, there may not be much in terms of a measurable effect on their circumstances.

In sum, bankruptcy may be a good option for seniors who are struggling to make ends meet during their retirement years. However, considering bankruptcy is an important decision which should be looked at carefully in view of your situation.  We have the knowledge and experience you need to help you understand your choices and determine the option which best suits your needs. Please contact us online or by phone if we may be of assistance.  http://bestmichiganlawyer.com/contact-us

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Bankruptcy and Foreclosure in Michigan

Getting behind on mortgage payments can be nerve-racking for homeowners.  It may be that the homeowner has paid faithfully for years only to have recently fallen on hard times.  For others, it may be that they took on more than they could afford and have never been able to keep up their payments.   In these and other situations, foreclosure will be a likely reality.  The homeowner who is thinking about bankruptcy and worried about potential foreclosure should consider the following:

For those who wish to keep their home, there are steps which can be taken prior to foreclosure which may help.  One option would be to contact the lender and try to negotiate an agreement which allows you to continue making payments on the mortgage.   However, if you simply cannot afford the home or your lender is not agreeable to a plan, bankruptcy may offer you the opportunity to avoid foreclosure and repay debt.

For those not yet in foreclosure, there may also be an option under bankruptcy which allows the homeowner to keep their home.  Under a Chapter 13 bankruptcy, the borrower agrees to enter into a repayment plan on their debts.  If the borrower is delinquent on mortgage payments, they can propose a plan which allows them to make their payments going forward while also paying for any past unpaid or late payments.   As long as the borrower complies with the terms of the repayment plan, they should be able to pay off their debt and keep their home.  Whether this option will be available will depend on the terms of the agreement which can be reached under this type of bankruptcy.

For those individuals who file a Chapter 7 or 13 bankruptcy, the bankruptcy court will issue what is referred to as an “automatic stay.”  The automatic stay functions to stop your creditors from attempting to collect the debts identified as being owed to them.  By having your home included as part of the bankruptcy estate, it will be included as a debt covered by the automatic stay.  For those with a home which is in the foreclosure process, the sale of the home can be delayed while the bankruptcy is pending.  However, the mortgage lien holder can ask permission from the bankruptcy court to allow the sale to occur while the bankruptcy is pending.  Once this is granted, the lender may proceed with the sale.   Essentially, when your home which is in foreclosure is included in your bankruptcy, you may be able to buy yourself a few months to catch up on your mortgage or work something out with your lender before the bankruptcy is complete or the lender has the automatic stay lifted.

Determining how bankruptcy will relate to your home and its future can be complicated.  With the advice of an experienced bankruptcy attorney, you can evaluate the options for your home during bankruptcy.  We have the knowledge and experience you need to help you understand your choices and find solutions. Please contact us online or by phone if we may be of assistance.  http://bestmichiganlawyer.com/contact-us

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Your Retirement and Bankruptcy

Planning for retirement while considering bankruptcy can raise a lot of questions. For instance, those faced with overwhelming debt may ask if it is best to tap into their retirement savings accounts in order to pay their creditors and avoid bankruptcy.  Another question they may have is how declaring bankruptcy will affect their retirement accounts.  These are important considerations and those thinking about bankruptcy and their retirement should consider the following:

When people are overwhelmed by their debt, many believe the best course of action is to deplete their savings and to dip into their retirement accounts to pay their creditors.   In most cases, using a retirement account to cover debt is not advisable because doing so leaves the borrower without their retirement savings.  In many cases, borrowers intend to pay back what they borrowed only to find themselves taking on new debt as they struggle to repay their retirement accounts.  In the end, many borrowers find that they are deeper in debt than before they borrowed and are now left without adequate retirement savings.

Reaching the place where you are considering using retirement funds to pay creditors is a sign that it may be time to decide if bankruptcy is a good option for a fresh start.  Choosing whether or not to declare bankruptcy involves taking an honest and thorough look at your financial circumstances.  There are questions you can ask yourself.  For example, are you only able to make the minimum payment on your credit cards? Are you being sued or contacted by unpaid creditors? Are you in a situation where you owe more than you own in assets and cannot see a way out?  The answers to these questions may help you determine if looking into bankruptcy is right for you.

Some good news about retirement accounts in bankruptcy is that, in most cases, those individuals who file for bankruptcy protection under Chapters 7 and 13 are permitted to keep the money in their retirement accounts.  This may include most IRAs, Roth IRAs, 401(k)s, pension plans, profit sharing plans, stock bonus plans, employee annuities, government deferred compensation plans and certain trusts. As long as the accounts are considered qualified accounts, they may be eligible for exemption from your bankruptcy.

Consulting with an experienced bankruptcy attorney will help you in determining if your retirement accounts qualify for the exemptions available under the law.   We have the knowledge and experience you need to help you understand your options.  Please contact us online or by phone if we may be of assistance.  http://bestmichiganlawyer.com/contact-us

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Federal Income Tax Returns and Bankruptcy

Taxes are a part of life.  This is especially true after a bankruptcy is filed.  In order to properly file your income tax returns when there has been a bankruptcy, it is important to be aware of certain things.

When you file for bankruptcy, you are in essence, handing over the management of your financial affairs to be managed by a bankruptcy court-appointed trustee.  The trustee will then use any of your assets which are not exempted from the bankruptcy, to pay your creditors.  The IRS requires that you the debtor, file an individual tax return.  Your trustee must also file a tax return on behalf of your bankruptcy estate which includes all of your assets which are subject to the bankruptcy.

Depending on which type of bankruptcy you file, you and the trustee may have different obligations.  For instance, under a Chapter 7 bankruptcy, the debtor files the same tax return they would have filed prior to the bankruptcy.  The trustee would then file a form on behalf of the bankruptcy estate.  However, under a Chapter 11 bankruptcy, which is usually filed by a corporation rather than a person, the debtor will have more control over the estate and may file on its own behalf and as the trustee on behalf of the bankruptcy estate.  Under a Chapter 13 bankruptcy, where creditors are typically being paid under a payment plan, the debtor must file a standard tax return, and the trustee must also file a specific tax form.  Further, in the event there is a tax refund, these funds will be applied to Chapter 13 creditors.  However, regardless of if it is a Chapter 7, 11 or 13 bankruptcy, all of the requisite tax return forms must be filed for the tax year.  The bottom line is that you need to be sure that you properly file your tax returns during bankruptcy.

A key requirement under bankruptcy is that the person filing may not take on any new delinquent debt while their case is before the bankruptcy court.  In the case of a Chapter 11 or Chapter 13 debtor, if they do not file their taxes or make required tax payments, their bankruptcy may become a Chapter 7 bankruptcy unless their bankruptcy is dismissed.  This may be highly detrimental to those debtors who are seeking to repay debts according to a prearranged plan or reorganize their businesses.  This is because Chapter 7 requires that all non-exempt bankruptcy estate assets be sold to pay creditors.  Therefore, the Chapters 11 and 13 debtor who chooses to assume tax debt may be placing their assets and agreements at risk.

Another consideration is that when a creditor forgives a debt, they may report the amount forgiven to the IRS and send you an IRS form called a 1099(c) which states the amount.  This would ordinarily be taxable income.  However, debt forgiven as part of a bankruptcy case is ordinarily exempted from taxation. In the event that you receive a 1099(c) related to a debt which was part of your bankruptcy, there is a form you can file which will notify the IRS that the debt was discharged according to the bankruptcy and is therefore not taxable income.

Filing your proper tax returns and observing proper tax procedures during and after bankruptcy is essential.  However, in order to ensure that you consider all aspects of your bankruptcy with respect to your tax returns, it is critical that you consult with an experienced bankruptcy attorney.  With the advice of your attorney, you will be able to plan for tax filings in a manner which complies with the applicable laws and the terms or your bankruptcy.

We have the knowledge and experience you need to help you understand what you need to do and plan accordingly.  Please contact us online or by phone if we may be of assistance.  http://bestmichiganlawyer.com/contact-us

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How to Efficiently and Effectively Prepare for Your Bankruptcy

Reaching the point when you decide you need to file for bankruptcy is no easy process.  Typically it involves a thorough evaluation of your condition and coming to terms with your financial realities.  Once the decision is made, the next step is to prepare yourself for the bankruptcy process. This process is not simple and can be overwhelming.  Fortunately, by taking specific actions to prepare before your bankruptcy begins, you can help make the process more efficient and effective.

Know Your Debts and Assets

When initially preparing to file it is important to conduct a detailed inventory of all of your debt and assets.  Bankruptcy law takes into consideration what you have and what you owe.  In some cases, there may be debt which does not qualify for bankruptcy.  Michigan, like most other states, have specific laws regarding what assets may be included in or excluded from bankruptcy.  Therefore, being aware of everything that will possibly be discharged or excluded from the bankruptcy is a critical piece of your preparatory process.

Gather Legal Documents

Gather all correspondence from your creditors.  Often those facing bankruptcies have legal actions against them for unpaid debt.  For example, if you failed to pay your credit card balance you may be facing a lawsuit from the credit card company to recover the debt.  By collecting all legal documents pertaining to creditor actions against you, you will later be in a position to communicate with your creditors regarding your debts and ensure they are correctly included in the bankruptcy.

Tax Returns

Some other key items that you will need to have ready are your tax returns.  Having at least two year’s prior tax returns will be helpful to your filing.   If you have not filed taxes, you will need to be prepared to explain why you have not.  If you have not paid some of your taxes, this will be an important area to address and consider before filing for bankruptcy.  It is also important to note that under most circumstances, unpaid tax debt will not be eligible for bankruptcy discharge.

Exemptions

Bankruptcy allows for certain exemptions.  What this means is that you may ask that certain assets not be considered part of the bankruptcy and remain in your possession.  For instance, in Michigan some examples of possible exemptions include your home, qualifying personal property up to a certain value, pensions, and some public benefits.  Determining the assets for which you may seek bankruptcy exemptions will help you prepare for the future.

In order to fully prepare for bankruptcy, it is critical that you consult with an experienced bankruptcy attorney who can help you ready yourself for this complicated process.  We the have experience and knowledge you need to prepare for and successfully navigate this process.  Please contact us online or by phone if we may be of assistance.  http://bestmichiganlawyer.com/contact-us

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Why You Need a Bankruptcy Attorney

When someone reaches the point where they believe they need to file for bankruptcy they usually know it is time to take action to deal with their financial circumstances.  While these people may know conceptually that there are documents they must file to begin their bankruptcy, this is a complicated area which must be traversed with great care.  Therefore, they will be in serious need of advice from someone who understands the bankruptcy process and its surrounding laws.  Without professional advice, these individuals run the risk of making mistakes which could result in their not fully benefitting from this process.  Therefore, when facing bankruptcy, having a knowledgeable bankruptcy attorney at your side is not only a good idea, it is critical.

Depending on your circumstances, you may be filing a bankruptcy for your personal debt or for that of your business.   For those filing personal bankruptcy, your attorney will help you assess your situation by examining your personal debts and assets.  In some situations, you may or may not qualify for personal bankruptcy depending on the amount of your income or the dollar amount of your debt.  Further, for those who do qualify, a bankruptcy attorney will be in a position to help you decide which type of bankruptcy is right for you.  For instance, if you have a home you want to continue owning, one type of bankruptcy may be the best choice for you.  By contrast, if you don’t have a lot in terms of personal assets and just wish to discharge your debt, another type of bankruptcy may be more appropriate. By sitting down with an experienced bankruptcy attorney, you can determine if you qualify for this relief and which type will best serve your needs.

Likewise, for those seeking to file for bankruptcy relief for their business, their attorney will be at their side to look carefully at the debts and assets of the business in order to determine in this relief is appropriate for them.  As in the case of personal bankruptcy, there are multiple options for those business owners seeking to file bankruptcy.  A bankruptcy attorney will have the knowledge you require in order to determine how to navigate this complex area of the law in a way that best serves you and the business.

An important consideration with filing for bankruptcy is that it is a legal process.  As such, there are complicated laws and filing requirements which must be observed.  Further, your bankruptcy will be overseen by a court which will expect the parties before it to be knowledgeable about its procedural rules as well as the law.  Knowing how to conduct yourself in court, which documents to present, and how to best do so can be incredibly complex and impact your case significantly.  Having an experienced bankruptcy attorney to help you navigate this process is essential to the success of your case.

If you are considering filing for bankruptcy, it is critical that you understand your options and obtain advice from an experienced and knowledgeable attorney.  We have the experience and knowledge you need to enable you to make informed choices about your financial future.  Please contact us online or by phone if we may be of assistance.  http://bestmichiganlawyer.com/contact-us/

 

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