Most Michigan consumers file for personal bankruptcy after their financial standing has taken a significant hit. In some cases, debt levels have simply climbed to untenable heights, and the ability to repay those obligations is unreachable. For others, the loss of a job or a faltering business has dealt a severe blow to their financial outlook. At that point, borrowers must decide if personal bankruptcy offers a viable financial solution, and if so, whether Chapter 13 or Chapter 7 is the better fit for their needs.
While each scenario is unique, the majority of consumers who file for Chapter 13 do so in order to save their home from foreclosure. Filing not only puts an immediate end to any pending or ongoing foreclosure efforts, it also allows the filer to restructure the rest of their debt to make repayment easier to manage. The borrower typically has between five and seven years in which to repay the debt included within the bankruptcy.
Unfortunately, there is no guarantee that one's financial standing will be any more stable after filing for Chapter 13 than it was before. In some cases, individuals have to weather additional challenges after they file, such as employment issues or even a divorce. When their financial landscape shifts yet again, it may become impossible to cover the costs of a mortgage, bankruptcy payments and the daily costs of living.
In these cases, it may be more advantageous to allow the home to go into foreclosure and convert to a Chapter 7 bankruptcy. While no one wants to walk away from a home that they have worked hard to earn and improve, filing for Chapter 7 can lead to the discharge of many forms of debt that would have been repaid under Chapter 13. The long-term result can be a significantly stronger financial platform in a shorter period of time, leaving a Michigan consumer in a better position to purchase a new home and begin with a fresh financial start.
Source: Fox Business, Can I Walk Away From Home in Bankruptcy?, Justin Harelik, Dec. 11, 2013