For the average consumer, there are basically these two chapters available. Chapter 7 is the most common and in the typical case, you (and your spouse if you are married and file jointly) will keep all of your property while wiping out (getting a court ordered discharge) of most of your debt (credit cards, medical and utility bills, past balances from car repossessions or home foreclosures). You can’t wipe out child support/alimony, recent income taxes and usually student loans. When I say that you will keep your property, I mean in a typical Chapter 7 bankruptcy case in which I am your bankruptcy attorney. This is because my office will diligently look into your particular financial circumstances and with the help of the bankruptcy exemption laws, protect your assets from being sold to pay your creditors. Only after a thorough evaluation between you and your bankruptcy attorney should you go forward with a Chapter 7 bankruptcy filing. I have seen people who have filed on their own or with an inexperienced attorney who dabbles in bankruptcy lose their entire life savings! When my office evaluates your case, you will know that you are safe and will not lose anything or, you will know exactly what property you might have that is not protected and will be advised on how to go forward. In 20+ years and over 10,000 bankruptcy cases filed for metro Detroit people, I have never had a client who lost something to the trustee that they did not know beforehand and usually we were able to simply settle with the trustee and pay the fair market value of the property if my clients wanted to keep it. You have to “qualify” for Chapter 7 meaning that you must show that after you pay your reasonable monthly living expenses, you have no money left over to pay your creditors and you wish to wipe them out.
Chapter 13 is basically a repayment plan and is usually filed if you are trying to save a home from foreclosure or a tax sale or you have some money left over every month but not enough to pay all of your creditors the amount they are demanding. Sometimes my clients will choose to file a Chapter 13 to protect an asset or some other property that may be subject to a trustee sale if the case were a Chapter 7, other times they choose to file 13 because they simply make too much money to qualify for a Chapter 7 and still will get significant financial relief through a Chapter 13 discharge. In a Chapter 13, none of your property can be sold by the trustee to pay your creditors, you simply pay the value of that property over time in the Chapter 13. The typical Chapter 13 repayment plan is 3 to 5 years.
The proper Chapter to choose should only be made after a thorough evaluation with an experienced bankruptcy attorney. I am a Board Certified Specialist in Consumer Bankruptcy in Southeast Michigan with over 20 years of experience and over 10,000 happy clients served.
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