What’s a Cramdown?

Cramdowns are actions you could take in a chapter 13 bankruptcy to reduce the amount of debt you would have to pay back for all of your secured debts. This is done by enabling you to pay for the fair market value of your property during bankruptcy rather than the total outstanding loan amount. For example, let’s say you bought a car that is currently worth $5,000 but you owe around $12,000 for your car loans. The cramdown stipulates that you will have to pay back the $5,000 through bankruptcy, but the remaining $7,000 will not have to be paid in full. Rather, that remainder will be considered unsecured debt, and will be paid for in proportion to all your other unsecured debt. Even if any of that $7,000 survives to the end of the bankruptcy it would ultimately be discharged. This tool is extremely beneficial when applicable in a chapter 13 bankruptcy because it reduces the total amount owed and reduces the amounts owed in monthly payments. In order to be eligible for a cramdown the property you are considering “cramming down” needs to have been acquired over 910 days before you filed for bankruptcy.

If you are considering whether filing for bankruptcy is the right action for you, it would be to your advantage to set up a consultation with a local bankruptcy attorney.

Can Bankruptcy Stop my Wages from Being Garnished?

Yes it can! One of the protections offered by bankruptcy, the automatic stay, prevents creditors who you owe money to from harassing you or garnishing your wages. Once creditors are notified you have filed for bankruptcy all garnishments must be terminated. In addition, you may be able to reclaim some of the money that creditors have garnished from you. In order to do so, you need to have had at least $600 garnished from your wages within the 90 days directly before your case. If you are considering filing for bankruptcy because your wages are being garnished but you have not yet had $600 garnished within the past 90 days it will be to your advantage to wait until you have had that $600 garnished so that you can reclaim those garnished wages.

If you have any additional concerns about your wages being garnished it would be to your advantage to set up a consultation with a local bankruptcy attorney in order to clarify any questions you may have.

What happens to my Retirement Plan if I file for Bankruptcy?

Certain retirement plans, pensions, employee benefit accounts, and spendthrift trusts can be exempted from the debtor's estate when filing for bankruptcy. Most plans and accounts that fall under the Employee Retirement Income Security Act (ERISA) are exempted from falling into a debtor’s estate when filing for bankruptcy. Certain other plans and accounts that are non-ERISA plans that also stay exempt from filing for bankruptcy include pensions from religious organizations and governmental entities. Additional plans that are excluded from ERISA as well as religious and governmental entities may also be exempted from the debtor’s estate, so long as they abide under § 541(b)(7) of the United States Bankruptcy Code or abide under specific state laws. Michigan’s bankruptcy laws exempt most pension and retirement accounts, but any amounts contributed to those pensions and accounts within the 120 days prior to filing for bankruptcy will not be exempt.

To better understand if filing for bankruptcy is the right action for you, it is recommended you set up an appointment with a local bankruptcy attorney.