The U.S. Federal Bankruptcy Code rules most of the criteria and processes for filing bankruptcy. However, most states have additional requirements. The three common types of bankruptcy are:
Chapter 7 - Also known as clean slate or fresh start bankruptcy, Chapter 7 bankruptcy is the most common type of filing. A means test showing severe financial need compared to income must be passed before Chapter 7 may be filed.
Both consumers and businesses can file under Chapter 7 - Through filing, they may eliminate most or all of their unsecured debt. Through Chapter 7, all non-exempt assets are liquidated to pay the filers debt. Any included debt not paid through liquidation is discharged. However, certain debts are not discharged including:
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Student loans Some taxes Criminal/DUI/DWI fines Alimony Child support Personal injury judgments against you Recent credit card purchases
Chapter 11 - A Chapter 11 bankruptcy is generally used by businesses wishing to restructure debt through reorganization while maintaining business operations. Chapter 11 is a complex and often very expensive form of bankruptcy and requires an experienced bankruptcy attorney's assistance.
Chapter 13 - A Chapter 13 bankruptcy is designed to help debtors with a regular income to restructure debt. Chapter 13 allows you to retain most of your assets through a court-approved repayment plan over a three or five year period. A Chapter 13 may be better for debtors who wish to hold onto to property which they might otherwise lose, such as a mortgaged home or car. However, to file a Chapter 13 you must meet income and other requirements. Once your payment plan is completed, your debt is discharged by the court.
Alternatives to bankruptcy
Alternatives to bankruptcy include:
Negotiation - In the current financial climate, creditors may be more willing to negotiate settlements or payment plans. However, contacting creditors directly can be daunting and the help of a qualified Michigan attorney may make the process easier.
Debt management - Debt management agencies can help you negotiate with your creditors. Some people have had success in using such agencies. However there are drawbacks in using debt management companies including:
Agencies often require debts to be paid in full Your plan can be canceled if you fall behind Conflict of interest issues Some agencies are incompetent or unethical
Recent media reports of fraudulent private agencies may keep debtors from trying this alternative. However, the federal government sanctions public agencies that have strictly controlled fees and trained counselors.
Is Bankruptcy Right For You? Talk to Bankruptcy Attorneys Free and Confidential. Licensed bankruptcy attorneys are available. Attorneys will call you to discuss your case for free. Find out if bankruptcy is right for your situation.
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