Filing for Bankruptcy
There are certain basic filing procedures that apply to both
Chapter 7 and
Chapter 13 bankruptcy cases. You begin proceedings by filing a petition with a bankruptcy
court. This petition should include a list of your assets, liabilities,
and creditors. If your petition is approved, you will receive an automatic
stay, which is protection from any collection action or harassment from
your creditors. Under the automatic stay all phone calls, letters,
wage garnishments, lawsuits,
repossessions, or foreclosures must cease until you can sort out your financial affairs
through the bankruptcy process.
Chapter 7 vs. Chapter 13
Chapter 7 and Chapter 13 address your debt load in different ways. Before
you choose which chapter to file for, there are several factors you should
- If you have assets that are above the exemption level as dictated in Chapter
7, you may want to file for Chapter 13.
- If the majority of your debts are consumer debts, and if your income will
greatly exceed your expenses after bankruptcy, a bankruptcy trustee could
decide to dismiss your Chapter 7 case for "abuse." In such circumstances,
filing for Chapter 13 would be the better option.
- If your monthly expenses substantially exceed your income, Chapter 13 is
probably not a viable option, as you would likely not be able to fund
your creditor repayment plan.
- If you are attempting to avoid repossession or foreclosure permanently,
Chapter 7 will not help you do so. Only under Chapter 13 can you reorganize
your debt in such a way as to decrease the likelihood of a repossession
In order to file either form, you must first complete the means test. This
will review your financial history by comparing your income and the amount
of your debt, looking to see if it is possible for you to pay back any
or all of your debt. Those that are financially able to make payments
will be able to file for Chapter 13, while those whose income will not
allow them to make payments may qualify for Chapter 7 bankruptcy. An accomplished
attorney can help clarify the differences between Chapter 7 and Chapter 13.
What can bankruptcy do?
When looking at bankruptcy, you want to be fully aware of what it can and
cannot do for you and your financial situation. In many cases, filing
can dismiss a good portion of your debts or at least ease your burden
by creating a manageable payment plan to pay it back. For families at
risk of losing their homes, it can put a hold on the possibility of a
foreclosure and allow time to make up missed mortgage payments. Additionally
it can protect other property from being taken by creditors and will prevent
repossession of most cars. If the utilities have been shut off due to
a lack of payment, many times filing for bankruptcy can get them turned
back on after making a minimal deposit.
One of the greatest benefits of bankruptcy can be the affect it has on
unrelenting creditors. Bankruptcy makes it illegal for debt collectors
to continue to contact you after you have filed for either Chapter 7 or
Chapter 13. They are no longer allowed to harass or present you with false
threats regarding your home, possessions or general livelihood. Under
the Fair Debt Collection Practices Act (FDCPA), collection agencies must
get in touch with your attorney if they have inquiries regarding your
debt payments. If you're experiencing wage garnishment, this can be
put to an end as well, allowing you the freedom to use your income as needed.
Understanding the Limitations
There are a few stipulations when filing for bankruptcy that individuals
must understand before they jump into the process and wind up surprised
along the way. It cannot eliminate entirely the debts you have against
secured creditors. This includes home mortgages and loans taken out for
car payments. Generally, creditors may come to an agreement on a repayment
plan, but the debt must be paid back in order for the individual to keep
Any debts that are accrued after filing for bankruptcy cannot be included
in any payment plan and will not be discharged. If the person petitioning
has child support payments, alimony, student loans, fines for criminal
charges, or money owed for taxes, these items must still be paid back
in full and cannot be dismissed. If you have further questions about what
is and is not included when filing bankruptcy, please do not hesitate
to get in touch with our office immediately.
Over 25 Years of Experience
If you are considering filing for
bankruptcy, it may be in your best interest to consult with a bankruptcy lawyer at
the Law Offices of Marshall D. Schultz. Filing a petition can be difficult,
and it is easy to make errors. We help our clients avoid costly mistakes
by providing them with personalized guidance through the entire process.
To date, we have
successfully helped over 10,000 individuals file for bankruptcy. We encourage you to contact us about your financial
situation, so that we can assist you in filing for the bankruptcy method
that is right for you. Our legal team will work to deliver the best service
possible in your case in an informal, non-judgmental atmosphere.
Visit one of our
offices in Detroit or Southfield, MI depending on whichever is most convenient for you!
Contact us for a
free consultation today.