Having an unmanageable financial debt can be overwhelming. If you’re thinking of filing for bankruptcy, you may want to explore which bankruptcy chapter is best for you. Our Detroit bankruptcy attorneys can help you understand if filing for chapter 7 bankruptcy is right for you and your family.
Chapter 7 vs. Chapter 13
Determining which chapter of bankruptcy to file depends on your debts, assets and financial goals. Chapter 7 and Chapter 13 bankruptcy both have benefits and disadvantages.
Chapter 7 bankruptcy is known as a liquidation bankruptcy and is designed to give you a clean slate from debt credit card and medical bills. Most people that qualify for chapter 7 bankruptcy have little to no income. In order to qualify for chapter 7, you must pass a means test. If you’ve passed the test, a trustee is hired to help you with review your case. The trustee’s job is to sell off any non-exempt property you have in order to pay back your creditors. If you do not have any assets, then your creditors will receive nothing.
Chapter 13 bankruptcy helps debtors reorganize their finances and create a payment plan to pay creditors back. Unlike Chapter 7, only individuals may file for chapter 13 bankruptcy. When you file for Chapter 13 bankruptcy, you are allowed to keep you of your property, but you must pay unsecured creditors back equal the amount of nonexempt assets.
Who is Chapter 7 Right For?
Filing a Chapter 7 bankruptcy is a big decisions that should not be taken lightly. Chapter 7 bankruptcy is designed for low to no income debtors to have a sweeping clean slate on their debts. In order to file for chapter 7 you must first pass a means test. Once you’ve passed a means test, you will be appointed a trustee to administer your case.
If you’re thinking about filing for Chapter 7 bankruptcy, you should know how it could affect you and anyone else in your family. Things you should expect when filing for Chapter 7 bankruptcy:
- Ruined credit: When you file for Chapter 7 bankruptcy, you credit will be negatively impacted for quite some time. A Chapter 7 bankruptcy remains on your credit report for up to 10 years.
- Closure of credit cards: Any and all credit cards you currently have will closed and you will most likely be unable to obtain new lines of credit for a few years following the bankruptcy. Keep in mind, any of the new credit cards you take out will likely be at a higher interest rate.
- Difficulty getting a mortgage: Filing for a bankruptcy will likely make it difficult for you to take out a mortgage as you will be seen as high risk debtor. There are mortgage companies that specialize in high risk debtors but filing for bankruptcy will limit your mortgage company options.
- Possible loss of property: When you file for Chapter 7 bankruptcy, your appointed trustee will comb through your assets and look for non-exempt property to sell and use to pay back your creditors. Many people have the misconception that if they file for Chapter 7 bankruptcy, they will lose their home. This is not always true.
While the above list can seem overwhelming, our Detroit bankruptcy attorneys are available to help you make sense of it all. We are skilled at handling bankruptcy cases and can help you win the best possible result for your family. When managing your finances, you want to make sure you have an advocate that is on your side. If you’re unsure of anything during the bankruptcy, our team will be there to assist you.
Contact us today for a free consultation.