Legal Question in Bankruptcy in Michigan

Secured Loans and Chapter 7 Bankruptcy

I have a car loan that I intend to include in a Bankruptcy Chapter 7. I returned the car to their institution, and then told them that I intended to claim Bankruptcy.

They told me that I cannot claim bankruptcy on a secured loan and that they still can come back after me for the balance later and garnish my wages. I thought all they could do was take the mechandise back (which I was already doing)and that this would be a fresh start otherwise what is the purpose of bankruptcy.

He said that the loan was secured by my signature and that was all he needed to garnish me and that this was not a dischargable debt. My husband cosigned, but he is claiming the BK with me.

The creditor is in California and I live in Michigan.

Thank You for taking your time to provide this very essential service.


Asked on 12/31/00, 6:13 pm

1 Answer from Attorneys
Don Darnell Darnell & Lulgjuraj, P.C.

Re: Secured Loans and Chapter 7 Bankruptcy

The creditor is wrong. There are very few exceptions (presently) to the general rule that all debts are discharged, the common exceptions are student loans and child support. If a chapter 7 debtor keeps the car, or wants to keep the car, he or she would have to continue to pay the debt. But, if you give it back, absent fraud, the debt is discharged in a chapter 7.

I would have advised you to keep the car and drive it for awhile during the pendancy of the bankruptcy, as I beleive most lawyers would also advise. I caution you to seek counsel to file your bankruptcy. I know there are "kits" available and paralegals who practice law (and should be arrested for it), and I think if you choose this route it is extremely dangerous.

Good luck to you.

Don

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Answered on 1/04/01, 11:52 am


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