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Chapter 7 vs Chapter 13 Bankruptcy in Michigan

May 23, 2012

At Resnick & Moss, we receive many questions regarding bankruptcy. Declaring bankruptcy as an individual is not an easy decision or process. It is important to be well informed about bankruptcy and alternative solutions to your debt problems. Individuals most commonly file for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 bankruptcy is when a debtor has all debts eliminated without paying creditors. The debtor files a case in federal bankruptcy court, there is a meeting of creditors approximately 30 days after filing, and if the trustee has no issues to investigate and files a no asset report, then the court issues a Chapter 7 discharge approximately 60 days later. The borrower/debtor is excused from the debt upon receipt of a Chapter 7 discharge.

Chapter 13 bankruptcy is when the debtor’s lawyer and the creditors negotiate a payment plan to repay debt at a lesser percentage than the full amount owed. The payment plan lasts between three and five years. During the time of the plan, the debt does not collect interest. The amount of money to be paid from the debtor to the creditors is calculated by taking the debtor’s income minus allowable monthly expenses. All debts that remain at the end of the payment plan time are wiped away.

Many people do not want to declare bankruptcy because of the stigma, complicated process and legal cost. Thus, it is important to know that there are alternative solutions to declaring bankruptcy. Another way to solve debt problems is to settle with creditors out of court. The debtor and creditor negotiate a sum, which the debtor will pay the creditor in full satisfaction of the debt. Often times, the creditor excuses some of the debt owed. The benefits to this option are vast. Settling out of court reduces legal costs. Furthermore, people often associate a negative stigma with bankruptcy and do not want to affect their credit rating. Although there will be some damage done to a credit record when debt is excused by creditors, it does not have as much of a negative impact as filing for bankruptcy. Moreover, during a bankruptcy case, the debtor must disclose all financial information. Settling the debt with your creditor keeps your personal finances private instead of exposing your financial issues publicly in bankruptcy proceedings. Lastly, avoiding court is less complicated, involves fewer people and is less intimidating. When filing for bankruptcy, the debtor must deal with a bankruptcy trustee, opposing attorneys and the court. On the other hand, settling the debt outside of court will avoid interaction with unnecessary third parties.

For further information regarding bankruptcy options, contact Resnick Law, P.C at 248-642-5400

Filed Under: Michigan Bankruptcy

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    40900 Woodward Avenue, #111
    Bloomfield Hills, MI 48304

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Our firm’s practice areas include:

  • Appeals
  • Asset Protection
  • Bankruptcy
  • Business Law
  • Chapter 7 Bankruptcy
  • Chapter 9 Bankruptcy
  • Chapter 13 Bankruptcy
  • Construction Law
  • Contracts
  • Corporate & Commercial Litigation
  • Creditor Rights
  • Debt Relief Laws
  • Estate Planning
  • Foreclosure
  • Guardianship & Conservatorship
  • Liability of Electronics
  • Property Tax Appeals

 

  • Real Estate & Zoning
  • Receivership
  • Short Sales
  • Solutions Without Bankruptcy®
  • Trust & Probate Administration

 

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    40900 Woodward Avenue, #111
    Bloomfield Hills, MI 48304

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Attorneys at Resnick Law, P.C. serve clients in Bloomfield Hills, Metro Detroit, the Tri-County Area and throughout southeast Michigan, including: Oakland County, Wayne County, Macomb County, Livingston County, Genesee County, Washtenaw County, Lapeer County, St. Clair County, Birmingham, Rochester Hills, Rochester, West Bloomfield, Bloomfield Township, Novi, Royal Oak, St. Clair Shores, Grosse Pointe, Walled Lake, Ferndale, Berkley, Sterling Heights, Clarkston, Farmington Hills, Ann Arbor, Howell, Brighton, Mount Clemens, Flint, Grand Blanc, Livonia, Dearborn, Troy, Plymouth, Pontiac, Northville, Southfield, Warren and Utica.

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