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How does personal bankruptcy work for individuals Detroit

How does personal bankruptcy work for individuals?

There are three prominent Chapters of the Bankruptcy Code that individuals can utilize to file bankruptcy. Personal bankruptcies are most commonly filed under Chapters 7, 11, 13 and less commonly Chapter 12.

Find the right fit for your bankruptcy needs:

One of the most important steps in determining if bankruptcy is right for you is to determine which chapter best fits your circumstances. Each chapter has different rules and benefits. Choosing the right chapter is an important part of any bankruptcy case, and it is a decision that should be made with careful and candid consultation with an attorney.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often referred to as a “liquidation” bankruptcy or “Chapter 7 liquidation”. In Chapter 7, the individual debtor is seeking a discharge of their debts. It is referred to as a liquidation because any of the debtors non-exempt property is liquidated to pay the Debtor’s creditors. (Learn more about exemptions here). Chapter 7 debtors must have income levels below a certain threshold depending on their household size, expenses, the state they live in, and other factors.

What happens to my home and car in bankruptcy?

In a Chapter 7, most unsecured debt is completely wiped out. Common examples of unsecured debts are credit card bills, medical bills, etc. (any debt that is NOT tied to property). However, some unsecured debts are nondischargeable (i.e. most student loans and most taxes).

The downside of Chapter 7 is that secured debts (i.e. car loans, home mortgages) are not wiped out. The debtor must continue to pay on secured debts if they want to keep the property. However, they have the option of surrendering the property to the creditor who holds the debt. Any personal liability on a secured debt IS discharged by filing a Chapter 7 bankruptcy. Since the lien remains in place on the property, a debtor must pay the obligations according to the original contract terms if he or she intends to keep the property such as a car or a house.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is structured repayment plan of some or a portion  of the individual debtor’s debts. The debtor must pay all “disposable income” for a period of three to five years in order to qualify for a discharge. The court must approve the plan, and any unsecured debt that is not paid off in the plan will be wiped out by a discharge order that the court will grant when all the approved plan payments have been made..

Catching up on mortgage payments and car notes is an option under Chapter 13 Bankruptcy

Secured debt must be paid in their normal monthly payments (either through or outside of the plan). Debtors can use the plan to pay any arrears and late fees on car loans or home mortgages over the plan payment period,  making it much easier for debtors to catch up on their secured debts.

Chapter 11 Bankruptcy

Chapter 11 Bankruptcy is similar to Chapter 13 in that it allows debtors to create  a repayment plan that proposes to pay some or all of the debtor’s debts over time. Often corporations, limited liability companies, and other businesses file under Chapter 11 . Individuals may also file under Chapter 11, and it is sometimes the only option for individuals that have debts of an amount in excess of a debt maximum under Chapter 13.

Chapter 11 Bankruptcy offers individuals flexibility but the costs and reporting requirements are more substantial

A Chapter 11 can provide more flexibility than a chapter 13, yet at the same time the debtor has additional responsibilities under Chapter 11. Chapter 11 debtors are required to file monthly financial reports during the restructuring period and the fees and expenses are more than the costs of a Chapter 13.

Chapter 12 Bankruptcy

Chapter 12 Bankruptcy is similar to Chapter 13 for “family farmers” and “family fisherman”, with additional benefits to debtors. Chapter 12 makes up a very small portion of the bankruptcy cases filed each year but is available if individuals meet the criteria of being designated a family farmer or family fisherman.

Conclusion

Choosing under which chapter to file bankruptcy is an important part of each bankruptcy case. Different chapters contain different restrictions and different benefits. The information above is general in nature, and you should speak to a licensed bankruptcy attorney in your jurisdiction before filing bankruptcy.

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DISCLAIMER: The information contained above is general in nature and provided as reference material only. This information is not specific legal advice about the application of the law to a particular fact scenario, nor does it replace (or purport to replace) any requirement to obtain specific legal advice. This information is not intended to and does not create an attorney client relationship. If you require legal advice, that advice should always be obtained from a qualified legal practitioner in your jurisdiction.

What are Bankruptcy Exemptions Detroit

What are Bankruptcy Exemptions?

Bankruptcy exemptions are a set of laws that determine what property you may keep after filing bankruptcy. Bankruptcy exemptions exist in both Federal and state law. The different exemption laws vary and in Michigan you may generally choose to elect either Federal or State law exemptions. An exemption analysis is critical before choosing to file for bankruptcy.

In General

Most State and Federal exemptions generally include the following: homestead, personal property, payments needed to support yourself, qualified retirement accounts, and a “wildcard” exemption. Keep in mind, the exemptions are limited to certain dollar amounts, which are adjusted every 3 years for cost of living.

This means that you will not have to give up the shirt off your back to file bankruptcy. You are allowed to keep living essentials, a modest amount of personal property, and a limited interest in your residence. The “wildcard” exemption allows you to exempt anything, regardless of whether it falls under an exemption, up to a certain amount. If you have unused homestead exemption, you can generally use a portion of that towards your “wildcard” exemption.

Exemptions in Chapter 7 or Chapter 13?

Chapter 7 Bankruptcy is commonly referred to as a liquidation – that is, any property not covered under bankruptcy exemptions will be liquidated and used to pay your creditors. This is why an exemption analysis is critical. If you have a large amount of non-exempt property that you wish to retain, Chapter 13 bankruptcy might work better for you.

Chapter 13 Bankruptcy is a reorganization process that allows you to keep your property and pay back a portion of your debt through a payment plan. Since you are generally keeping your property in a Chapter 13 case, exemptions play a factor in determining how much you will have to pay (Learn more about Chapter 7 and Chapter 13 here).

Conclusion

Each case is unique, and an exemption analysis is the first step to determining whether or not you should file bankruptcy and, if so, which chapter you should file. Understanding proper exemption analysis is critical to a successful bankruptcy case. The information above is general in nature, and you should speak to a licensed bankruptcy attorney in your jurisdiction before filing bankruptcy.

Schedule a Free Consultation

 

DISCLAIMER: The information contained above is general in nature and provided as reference material only. This information is not specific legal advice about the application of the law to a particular fact scenario, nor does it replace (or purport to replace) any requirement to obtain specific legal advice. This information is not intended to and does not create an attorney client relationship. If you require legal advice, that advice should always be obtained from a qualified legal practitioner in your jurisdiction.

 

Can I Keep My House If I File Bankruptcy Detroit

Can I Keep My House If I File Bankruptcy?

Ultimately it depends on your circumstances. It mostly depends on three factors: (1) which chapter of bankruptcy you are filing, (2) whether or not you can continue to pay your mortgage payments, and (3) whether or not you can exempt any equity you may have.

Chapter 7

Chapter 7 bankruptcy is likely the best option if you can exempt any equity you may have. Federal Bankruptcy law and Michigan common law contain homestead exemptions that allow you to keep a certain amount of value in your home despite filing bankruptcy. Chapter 7 provides a quicker way to wipe out your debts without having to make plan payments, like in Chapter 13. Keep in mind, however, that any non-exempt assets will be recovered and sold by the Trustee in Chapter 7 (Learn about exemptions here).

Remember, you must be able to afford your mortgage payments going forward, or else your mortgage company could foreclose. Foreclosure is a process that even bankruptcy cannot always stop (Learn about foreclosure here).

If you have DO HAVE non-exempt equity in your home, even if you are behind on your mortgage payments, Chapter 13 may be right for you.

Chapter 13

In most cases, you may keep your home in Chapter 13 bankruptcy. Chapter 13 allows for payments to be made on missed mortgage payments through a repayment plan, even if you have equity in the property. Repayment plans are generally 3-5 years, which provides breathing room for many debtors to catch up on their late payments. The Automatic Stay protects you from foreclosure as long as you make your plan payments in full and on time.

Another benefit of chapter 13 is getting rid of second mortgages. In some cases, when the first mortgage balance exceeds the value of the home, a debtor may remove the second mortgage from the home through an action called “lien stripping”. A successful lien strip allows the second mortgage holder to be treated as an unsecured creditor, which generally gets paid much less through your repayment plan.

Conclusion

In some cases, you may keep your home if you file bankruptcy. Each case is unique, however, and the information provided above could not possibly cover every possible scenario. The information above is general in nature, and you should speak to a licensed bankruptcy attorney in your jurisdiction before filing bankruptcy.

Schedule a Free Consultation

 

DISCLAIMER: The information contained above is general in nature and provided as reference material only. This information is not specific legal advice about the application of the law to a particular fact scenario, nor does it replace (or purport to replace) any requirement to obtain specific legal advice. This information is not intended to and does not create an attorney client relationship. If you require legal advice, that advice should always be obtained from a qualified legal practitioner in your jurisdiction.