When a lot of people in Michigan think about filing for bankruptcy, they may not have positive feelings about it. For many years, bankruptcy was thought to be for people who were not capable of handling their own affairs. The attitudes of most people on this issue have now changed, however. Especially since the last recession, bankruptcy has come to be viewed as a sensible choice for good people who get in over their heads through no fault of their own.
There are three chapters of the federal bankruptcy code that could apply to individuals who are considering bankruptcy. In a Chapter 13 bankruptcy, consumers commit to a repayment plan that covers some or all of their debts. After the repayment plan is complete, any remaining eligible debt is wiped off the books. Chapter 13 is meant for people with steady income sufficient to make manageable payments.
In a Chapter 7 bankruptcy, all eligible debt is eliminated over four to six months. The bankruptcy court will appoint a trustee who will oversee the liquidation of certain of the consumer's assets in order to compensate creditors in full or in part. Chapter 7 is available to consumers who are unable to make manageable payments and who meet other financial requirements.
Chapter 11 bankruptcy is primarily used by businesses wishing to reorganize. Since almost all consumers are eligible for Chapter 7 or Chapter 13, few use Chapter 11.
If you are considering bankruptcy as a solution to financial challenges, what is the most important first step you can take? Many authorities will tell you that a good first step is to get reputable legal representation to guide you through the process.
Source: Fox News, "Using personal bankruptcy to hit the reset button on distressed properties," Robert Massi, Aug. 27, 2015