The Different Types of Bankruptcy
Are you considering bankruptcy in Michigan? Are you finding yourself in financial distress during this difficult time? Do you think bankruptcy may be your only answer? Please continue reading to obtain more information about how to proceed.
Bankruptcy means to have all or most of your debt eliminated or reduced by working with the court and the court-appointed Trustee, who manages your case.
Most people intend on paying back the money they have borrowed. However, unexpected things occur, such as illness or job loss, and you may find yourself unable to make the monthly payments.
There are three types of bankruptcy.
What is Chapter 7?
Chapter 7 is designed to eliminate debt to allow you to get on with life. It is the fastest and most straightforward type of bankruptcy. It works best if you have unsecured debt such as medical bills, personal loans, and credit cards. In most cases, your assets are safe, such as a home, car, and other valuables.
When to Consider Chapter 7 Bankruptcy
- You have medical bills
- Your wages are being garnished
- Collection agencies are calling you and your family
- A change in family status, such as marriage or death, and your finances have been affected
- You are making minimum payments each month, but not more
- You are being sued
- You have payday loans
- You have had a repossession
- You are stressed and worried about your finances
- You are earning less money now than previously
Will Chapter 7 Eliminate all Debts and Judgments?
Chapter 7 will wipe out almost every kind of debt and judgment. Some debt, such as student loans, cannot be eliminated by Chapter 7 but can be handled under Chapter 13. Some individuals mistakenly believe that income tax debt cannot be discharged. But under certain conditions, a Chapter 7 can eliminate tax debt.
Will I Lose All My Assets Under Chapter 7?
Chapter 7 is called liquidation bankruptcy because the Trustee may sell assets to pay back creditors. With the help of the right law firm, actual liquidation occurs infrequently. State and Federal bankruptcy laws provide a list of specific things that the debtor can retain. These exemptions are protected from bankruptcy and are out of reach of the creditors and the Chapter 7 Trustee. In most cases, people who file Chapter 7 will not lose their assets.
What is Chapter 11?
Chapter 11 is primarily for viable businesses to reorganize their debt. Corporations, such as General Motors, have used this form of business bankruptcy to encourage growth and stability. This type of bankruptcy is costly and complicated and not suitable for most individuals.
What is Chapter 13?
Chapter 13 is a very common bankruptcy. It allows the individual to repay a majority of all of his/her debts through a payment plan approved by the Bankruptcy Court. The payments are made to the Chapter 13 Trustee, and he distributes the money to creditors. After the last payment, the debtor is not liable for the remainder of the dischargeable debts. This type of bankruptcy generally takes between three and five years, depending on the specifics of the Chapter 13 plan, the amount of the debt, and the ability to pay.
When to Consider Chapter 13 Bankruptcy
- You are behind on your mortgage payments
- You are behind on your vehicle payments
- You do not qualify for a Chapter 7 bankruptcy
- You want to protect your assets
- Your income has been interrupted, and want to catch up
- You have a tax debt that you need help to resolve and fix permanently
- You would like to pay back some money to the creditors
Bankruptcy law is unique. You want to retain a law firm that will make a difference in your life in a short time. You want a firm that will fight for you and not be intimidated by giant banks and creditors.