Bankruptcy: Chapter 7 or 13?
This is one of the most commonly posed questions to attorneys and other financial professionals by those seeking financial help. People suffering from an unmanageable debt load seek out a bankruptcy attorney for help. It helps to first try and understand what a Chapter 7 and Chapter 13 bankruptcy is and what types of relief they provide. Those asking this question should speak with a local bankruptcy attorney in Michigan.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is commonly also called a “liquidation” bankruptcy. In a Chapter 7 filing, the debtor eliminates his or her debt through a liquidation of that persons assets. However, a liquidation of a debtors assets rarely occurs in practice, due to a number of reasons, mainly because the debtors assets come under statutorily provided exemptions.
Once a bankruptcy petition is filed with the local bankruptcy Court, the court issues an automatic stay. An automatic stay will instantly stop all collection activities. In addition, the debtor is assigned a trustee. A trustee is a court appointed third party that satisfies a number of functions for the court and the debtors creditors. In most instances a debtor will come into contact with their trustee once during whats called a 341 meeting. The 341 meeting is an informal meeting between the trustee, the debtor, and the debtors attorney.
Call your local Chapter 7 bankruptcy attorney and find out whether you qualify.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is also called a reorganization bankruptcy, whereby the debtors debts are reorganized into some sort of payment plan. Payment plans usually last between 2-5 years. Once the debtor has successfully completed the payment plan, the debtor is issued a discharge from the Bankruptcy Court. The issuance of a discharge marks the end of the bankruptcy case.
What Should I File?
Now that you know the difference between a Chapter 7 and Chapter 13 bankruptcy, the question lies in under what chapter should one file. This is a difficult question to answer and really depends upon your unique financial situation. In filing under Chapter 7, the debtor must meet certain requirements, which depend on the debtors assets, income, and debt levels. People that dont qualify for a Chapter 7 bankruptcy dont have a choice but to file under Chapter 13 and repay their creditors, albeit at a lower amount.
Debtors should get their financial questions answered by speaking with a chapter 7 bankruptcy attorney.