Which Bankruptcy Chapter Should I File?
Most personal bankruptcies filed in the Unites States fall under either Chapter 13 or Chapter 7 of the United States Bankruptcy Code. (Business Bankruptcies are covered under Chapter 11).
Deciding whether Chapter 13 or 7 Bankruptcy is right for you depends upon:
- Your wages, earnings or other sources of income,
- The value of your property & assets (home, autos, bank accounts, etc.),
- The total amount of your debts (credit card, medical bills, judgments, etc.),
- Your personal long term financial goals.
In this article, our experienced Southfield bankruptcy attorneys have set forth a few of the main differences between Chapter 7 and Chapter 13, below. But the best way to decide which bankruptcy chapter is the best for your unique personal situation is to sit down and discuss your situation with an experienced bankruptcy attorney.
Once you have read this article, you are welcome to call our experienced, caring & affordable Southfield bankruptcy attorneys for a FREE consultation to decide what is right for your situation.
Attorneys Explain Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is designed to completely “wipe out” all of your unsecured debts. An unsecured debt is one that is not attached to an “asset”. Credit card bills and medical bills are “unsecured” debts – so they can be completely “wiped out” in Chapter 7 Bankruptcy! (Houses and cars are “secured” debts.)
To qualify for Chapter 7 bankruptcy, the debtor must have little or no disposable income. If an individual makes too much money, the Bankruptcy Judge will require him or her to file Chapter 13 Bankruptcy instead of Chapter 7.
Chapter 7 Bankruptcy is also referred to as “liquidation” bankruptcy. This is because, when filing Chapter 7, you are required to “sell off” any assets of value that you have. In other words, sellable assets are “liquidated”, and your creditors are paid back from the sale of the assets. The rest of your debt – the part not paid back by the sale – is then completely “discharged” (eliminated).
And if you have no assets to sell – then no one gets paid back and the debt is simply discharged (eliminated). Therefore, Chapter 7 is usually the best solution for low income debtors with little or no assets who simply want to get rid of their unsecured debts.
Certain of your assets are also “exempt” from being sold in a Chapter 7 liquidation. You may be allowed to keep your home, car and personal belongings, such as clothing, photos, etc. An experienced bankruptcy attorney can explain exactly what you may or may not be able to keep in a Chapter 7 bankruptcy.
Attorneys Explain Chapter 13 Bankruptcy
Unlike Chapter 7, in a Chapter 13 Bankruptcy you do not receive an immediate discharge (elimination) of your debts. Instead, you enter into a repayment plan that allows you to pay of your debts over time. In some cases, the total amount of your debts may be reduced – in other cases the amount you owe may remain the same, but you will be given more time to pay – usually with lowered payments.
For this reason, Chapter 13 Bankruptcy is also called “Wage Earner Bankruptcy” or “Reorganization Bankruptcy.” Chapter 13 Bankruptcy is specifically designed for people who have regular wages or income and/or other assets.
Under Chapter 13 you do NOT have to “sell off” your property – you are allowed to keep it, because your repayment plan allows you to pay back your creditors over time. Usually this repayment period lasts from 3 to 5 years.
One of the advantages that Chapter 13 offers over a Chapter 7 “liquidation” is that individuals have an opportunity to save their homes from foreclosure – while generally Chapter 7 bankruptcy only delays the foreclosure process.
Which Bankruptcy Is Right for Me?
The only sure way to determine whether filing a Chapter 13 or Chapter 7 Bankruptcy is best for your unique personal situation is to consult with one of our experienced Southfield Bankruptcy attorneys.
Best Southfield Bankruptcy Attorneys
Our skilled bankruptcy attorneys have helped thousands of individuals in Oakland, Macomb & Wayne County get a fresh start. We will explain your options and answer your questions. Then we can immediately file a “stay” for you, to stop (“stay”) ALL collection actions, garnishments, repossessions or foreclosures right away.
We have helped hundreds of individuals in the metro Detroit & Southfield area. We can help you, too.
Southfield Bankruptcy Attorney Free Consultation: 248-357-3000