• Redd Law, PLC

There have been problems with people who are unable to hire an attorney filing bankruptcy themselves. Unfortunately, their paperwork is often incorrectly completed and they often do not follow the required court procedures. Therefore, there is a new pro bono program designed to provide free legal assistance to low income debtors. 

Access to Bankruptcy Court (http://www.accesstobankruptcycourt.com/) was started by a group of legal professionals in the Eastern District of Michigan. The organization is nonprofit and accepts donations so that low income debtors may receive free legal assistance with a Chapter 7 bankruptcy. Only a limited number of people are able to be assisted due to limited funding.

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  • Redd Law, PLC

At the end of the year, many people start thinking about their tax refunds. As a result, they are often concerned about whether filing a bankruptcy petition may affect those refunds. Will they get the refunds or will the court or bankruptcy trustee take them?

Generally, in a Chapter 7 bankruptcy, most people get to keep their income tax refunds. However, the anticipated refunds must be listed as an asset and exempted in the bankruptcy schedules. This is important even if you haven’t prepared your tax return and don’t know exactly how much your tax refund will be. I’ll often look at my clients’ most recent tax return to determine how much they may recent on the next one if they will earn about the same amount of money.

What happens if tax refunds are not disclosed in a Chapter bankruptcy petition? Failing to disclose the refunds may result in the trustee taking them for the creditors. The trustee will simply send a letter to the IRS requesting that the refunds be turned over.

In a Chapter 13 bankruptcy, most debtors are required to contribute tax refunds toward their Chapter 13 payment plan. In Detroit, the Chapter 13 trustees have the debtors sign a form so that the federal tax refunds can be sent directly to the trustees. However, Chapter 13 debtors may be allowed to keep their refunds if they need them for an emergency or important expense that isn’t already included in their budget. Chapter 13 debtors who want to keep their tax refund should contact their attorney for guidance before filing their tax returns.

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  • Redd Law, PLC

After most foreclosure sales in Michigan, the homeowners have the right of redemption for six months.  This means that they have an extra six months after the sale date before they have to move.  The homeowners can also use the six month redemption period to sell the home or to redeem the home by paying the mortgage company the redemption cost which includes foreclosure attorney fees and costs.  This right of redemption can be affected if a homeowner files a Chapter 7 bankruptcy petition.

In a Chapter 7 bankruptcy case, all of the debtor’s assets become property of the bankruptcy estate.  However, debtors can keep exempt property.  If a debtor does not completely exempt his or her right the redeem a home, the trustee can redeem the home by paying the mortgage company the amount of the bid at the foreclosure sale.  Then, the trustee can sell the home for a profit.  This usually only becomes a problem if the debtor hopes to remain in the home for the entire six month redemption period.  Also, the debtor may be inconvenienced when the trustee wants potential buyers to view the home.

Detroit Chapter 7 bankruptcy trustees have been redeeming foreclosed homes in order to obtain significant money for creditors.  In many cases, they redeem the homes even after the debtor receives the bankruptcy discharge by keeping the case open or by reopening the case at a later date.  Therefore, a Chapter 7 debtor who receives a bankruptcy discharge might still lose the right of redemption if his or her home is sold at a foreclosure sale.

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