Many Michigan consumers may consider the protection of personal bankruptcy but are unsure which option to choose. Chapter 7 bankruptcy only applies to consumers whose disposable income level falls below a prescribed level. Chapter 7 bankruptcy usually provides debt relief within months, but it involves the liquidation of assets, and only unsecured debts will be discharged. Chapter 13 involves a court approved extended payment plan, and payments have to continue for three to five years, after which remaining balances may be discharged.

While a Chapter 13 bankruptcy may provide the opportunity for you to keep secured assets — such as a car or your home — if you maintain the monthly payments according to the payment plan, Chapter 7 simply results in a liquidation of those assets for the benefit of the secured creditors. The discharge of support debts such as alimony, child support or student loans will generally not be allowed under Chapter 7 bankruptcy, and Chapter 13 does not absolve the filed from paying any outstanding balance for those debts after the bankruptcy proceeding is completed. While outstanding debts from a divorce agreement may be wiped out after completion of the payment period under Chapter 13, they will usually not be discharged under Chapter 7 bankruptcy. However, if the ex-spouse agrees or if the court deems it appropriate, the outstanding amount may be discharged.

If you have a co-debtor on a loan, the co-debtor may face claims for payment in a Chapter 7 scenario, while creditors may not harass co-debtors during the Chapter 13 proceeding. Unless a debtor can pay the bankruptcy trustee an agreed price for nonexempt valuables, such as artwork or musical instruments, a filer under Chapter 7 may have to relinquish such assets. Nonexempt valuables will remain your property under Chapter 13 bankruptcy. In order to retain secured property under Chapter 7, you may be allowed to pay for it in one lump sum payment, while repayment over the arranged period may be allowed under Chapter 13.

If you file for Chapter 7 and the court determines that you are not below the required income level, the proceedings may be converted to a Chapter 13 bankruptcy. Consumers who have had a previous bankruptcy can typically only re-file a Chapter 13 and not a Chapter 7 bankruptcy — with exceptions. Consumers in Michigan with unmanageable debt may benefit from visiting our[url=’http://www.marrsterry.net/Bankruptcy-Overview/Chapter-7.shtml’]bankruptcy website.[/url]

Source: FindLaw, “Chapter 7 vs. Chapter 13 Bankruptcy“, , Aug. 30, 2014

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