Is Chapter 7 Bankruptcy Right For Me?
Chapter 7 bankruptcy is designed to wipe out debts and allow you to get on with your life. It is the fastest and most straightforward type of bankruptcy, making it a popular choice for many Americans. Filing Chapter 7 bankruptcy generally works best if you are burdened with a lot of unsecured debt like credit cards, medical debt relief, and personal loans. In most cases, if current on payments, you can keep your assets like your car, home, and other valuables, when you file. (If Not Current, we can look at a Chapter 13 case to help you get current & keep them!) The Court appoints a Chapter 7 Trustee to review your case and this is the person we meet with when we go to court.
Will I Lose My Property?
Chapter 7 bankruptcy is often called liquidation bankruptcy because some assets may be sold by the Trustee in order to pay back creditors. However with our clients, because of our knowledge, experience & guidance, actual liquidation seldom happens. State and Federal bankruptcy laws offer a list of specific items that a person, couple, or family may keep. These are called “exemptions” because they provide protection for assets which are then “exempt” from the bankruptcy and out of the reach of the creditors and the Chapter 7 Trustee. In the vast majority of cases, people who file Chapter 7 bankruptcy, with our office will not lose any of their property.
Will it Get Rid of All of My Debt and Judgments?
Chapter 7 bankruptcy wipes out almost every kind of debt and judgment. Some debts, such as student loans, cannot be treated in a Chapter 7 bankruptcy (but can be dealt with in a Chapter 13 case). Many people mistakenly believe that income tax debt cannot be discharged, but under certain circumstances, a Chapter 7 bankruptcy can even wipe out debts to the IRS.
Consider Chapter 7 Bankruptcy When:
- You are making your minimum credit card payments each month, but not much more
- You have one or more payday loans
- You have medical bills you cannot pay off all at once.
- Someone is trying to sue you
- You are making less money now than you had previously
- A change in family status (like a divorce, retirement, or death) has affected your finances
- Collectors are calling you and your family
- You have had a repossession
- You are being garnished
- You are stressed or worried about your finances. We offer a free consultation!
Michigan Credit Counseling and Debtor Education
Beware of scam businesses that offer these services or who promise cheap, flat rate bankruptcy filing. The government keeps a list of all approved and licensed credit counseling agencies. For information about Michigan credit repair scams and reputable organizations, visit: https://www.michigan.gov/ag/0,4534,7-359-81903_20942-252598–,00.html
There are also special pre-bankruptcy credit counseling services that are required before a person can file a bankruptcy case. Our office helps you through this and sets you up with an approved provider.
Credit counselors advise you on your money and debts, help you budget, and offer workshops. A reputable credit counseling agency will send you information and educational material at no cost and without your personal information. Credit counseling will also not affect your credit.
An experienced lawyer should help you navigate the legal requirements and education needed to file for bankruptcy.
Alternatives to Chapter 7 Bankruptcy
It’s always important to consult with an attorney to understand the specifics of your case and to know whether you might have alternatives to Chapter 7 bankruptcy, because Chapter 7 bankruptcy is a serious decision and should not be taken lightly. Sometimes there are simpler avenues for you to take. Other times, another form of bankruptcy may be more appropriate, such as Chapter 13.
Only an experienced attorney can guide you through this process! Not a “dabbler” who does bankruptcy once in a while, but a true bankruptcy specialist. After all, it is your assets, your money and your life!
If you are currently making payments on your debts, a Michigan Chapter 7 bankruptcy may not always be the best option. Bankruptcy is considered a last resort- when there is no possible way to pay back your debts and you face aggressive creditors, or are worried about wage garnishment or vehicle repossession or foreclosure. Chapter 7 can be a huge relief for many, many individuals.
Debt Settlement or Consolidation
You may be surprised by some creditors’ willingness to settle a debt for less than what you owe. If you are making minimum payments, there is little likelihood a creditor will lower your debt. That said, if you are not making minimum payments, a creditor is faced with the real possibility that they may not get their money back. In these scenarios, many creditors are willing to settle your debt in full for less than what you owe them.
Debt settlement can be arranged by an attorney or specialized company, though some individuals negotiate on their own. Not all creditors will agree to settle a debt. If they do, most creditors will require a lump payment to settle. Though this option can help avoid bankruptcy, it can still have longterm consequences. Debt settlement can still negatively affect your credit. Additionally, when creditors report what you owe in a settlement, any savings off your balance may be reported to the IRS as income & the IRS will want taxes paid on that savings.
If you are facing debt and financial hardship, it’s always best to consult with an attorney to weigh your options.
If you are unsure whether Chapter 7 is right for you, please give our office a call today. We have attorneys at all of our offices: Warren, Flint, Dearborn Heights, Ann Arbor-Ypsilanti, and Saginaw, and we offer FREE, no-obligation consultations through each office.