Consumer Bankruptcy
What Assets Can I Keep
Do's and Dont's of Bankruptcy
Bankruptcy Process
Myths of Bankruptcy
Bankruptcy Terms

What Do I Need to Bring In?

Other Frequently Asked Questions

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The Consumer & Chapter 7

Chapter 7 bankruptcy, sometimes called a "straight bankruptcy" is one of the more simple chapters to file under. In short, Chapter 7 rids you of your financial bills and stops the harassment.

To be eligible to file a Chapter 7 bankruptcy, your income must be below average for your area. If this is not the case, you must pass a means test to determine whether you are eligible to file a Chapter 7, or if you must file a Chapter 13 instead. This will be determined when you meet with your attorney to file for bankruptcy. A Chapter 7 may not take care of all debts. Debts it does not cover include new taxes, child support, student loans, fines, restitution and alimony.

A common concern that people have is whether filing a Chapter 7 means they will lose everything. The answer is no. Some of your property is exempt from liquidation. These include your car, your home, clothing and anything else necessary for survival and to earn a living. This comes as a relief to people worried that they may lose their home and general livelihood due to a bankruptcy. This is one of the many benefits of filing a Chapter 7 bankruptcy.

There are many benefits to filing a Chapter 7 other than just keeping your house and car. Speed is a big factor when it comes to Chapter 7. As opposed to a Chapter 13, which can take up to 5 years to complete, a Chapter 7 only takes about 90 days. There is also no repayment plan to deal with, which means less hassle in the long run. While filing you are also protected from annoying creditors. This means no more phone calls, wage garnishment, repossessions or foreclosure proceedings. Also, you will benefit from an improved credit rating.

This may sound unbelievable, but it’s true --- most people come out of a bankruptcy with a higher credit rating.

Chapter 13

Chapter 13 bankruptcy is a repayment plan, sometimes called a "wage earners’" plan. It allows people who have a regular income to repay all or part of their debts. With a Chapter 13, a repayment plan is proposed that will make payments to the creditors over a three-to-five year period. The court will approve the plan or revise it based on the debtor’s situation and eligibility.

There are several advantages that a Chapter 13 offers over a Chapter 7. One of the most significant advantages is that a Chapter 13 allows people the opportunity to save their homes from foreclosure. A Chapter 13 can stop the foreclosure process and may resolve past-due mortgage payments. A Chapter 13 allows the individual the ability to pay other secured debts they may have incurred over the span of the bankruptcy (3-5 years). This may lower the monthly payments of those debts. This chapter also protect co-signers of those debts. The final advantage of a Chapter 13 is that it acts as a consolidation loan. This means that the debtor will make payments to a Trustee overseeing the bankruptcy and distribute those payments to the individual creditors. As a result, the debtor will have no contact with the creditors, which may prevent many financial headaches in the long run.

A Chapter 13 however, is not for everyone. Debtors will have to meet several eligibility requirements.

A Chapter 13, definitely is a longer process, but unlike a Chapter 7, you normally get to keep all of your personal property. However, you should always sit down with Saginaw bankruptcy attorney Peter Riebschleger and look at all of your options before filing any kind of bankruptcy.   


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