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Understanding the types of consumer bankruptcy

Michigan residents who are overwhelmed by their financial obligations to the point that they are unable to repay all of their debts may want to consider bankruptcy as an option. There are two primary types of consumer bankruptcy that may offer debtors some relief.

Chapter 7 bankruptcy is the most popular type. In 2015, 63 percent of all of the bankruptcy cases that were filed were Chapter 7 cases. In this type of bankruptcy, debtors who meet the financial guidelines and who are successful in their petitions will have the majority of their unsecured debts discharged. This means that they will no longer be responsible for repaying them.

Chapter 13 bankruptcy is available to people whose debts do not exceed certain amounts and who want to keep more of their property. In this type of bankruptcy, people enter into repayment plans that last either three or five years. If they successfully complete their repayment plans, most of the remaining unsecured debt is discharged. In both cases, when bankruptcy petitions are filed, the courts enter automatic stays that prohibit the creditors from pursuing further collection activities, including garnishments, lawsuits, and harassing phone calls.

People who are facing serious financial challenges might want to consider bankruptcy. Whether they file Chapter 7 or Chapter 13 petitions, bankruptcy may help to give them fresh financial starts. Experienced bankruptcy lawyers may discuss the different types of bankruptcy so that the debtors might learn which options are more appropriate for them. They may help to draft and file the petitions and explain the financial information that their clients need to gather together.