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 consider, including:
- 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 repossession or foreclosure.
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 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 effect 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 their property.
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 50 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 throughout 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.
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