Choosing Between Chapter 7 and Chapter 13
- What is the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy?
- What is the difference between a Chapter 13 discharge and a Chapter 7 discharge?
General Bankruptcy Questions
- How do I know if bankruptcy is right for my circumstances?
- I don't really want to file bankruptcy - what are my other options?
- Will my legal rights be affected if I file for bankruptcy?
- I have heard that the laws changed for bankruptcy...can I still file?
- Do I need an attorney's help to file for bankruptcy?
- I heard that I have to complete a credit counseling class before I can file? What does this mean?
- I already filed bankruptcy. Can I file again?
- If I file bankruptcy, will the creditors stop contacting me?
- How long does bankruptcy appear on my credit report?
- If I file bankruptcy, is my spouse required to file with me?
- What if my debt has a co-signer - do they have to file as well? Will he or she still be obligated on the debt?
- What is a discharge?
- Are some debts non-dischargeable?
Bankruptcy and Your Home
- Can a bankruptcy stop a foreclosure sale on my home?
- What if I can no longer afford my house or car?
- Will I ever be able to buy a house after I file for Bankruptcy?
- Will I qualify to refinance since I am in a bankruptcy?
Bankruptcy and Your Car
Choosing Between Chapter 7 and Chapter 13
Q: What is the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy?
A: A Chapter 7 Bankruptcy is a fresh start in which all or most of your unsecured debts are discharged. A Chapter 7 applies when your monthly income only meets your basic living expenses (i.e. mortgage payments, food, clothing, utilities, etc.). A Chapter 13 will help you if you are behind on your mortgage or car payment but you have some disposable income to pay your creditors. A Chapter 13 (wage earner's plan) requires you to make monthly payments to the Bankruptcy Court, allowing you to resume your monthly mortgage payments while paying the missed payments over time. You are not required to all debts in full. » Back to top
Q: What is the difference between a Chapter 13 discharge and a Chapter 7 discharge?
A: A Chapter 13 discharge is given at the completion of the terms of an approved plan. A full Chapter 13 discharge is broader and completes more debts than a discharge that is received at the completion of a Chapter 7 case. » Back to top
General Bankruptcy Questions
Q: How do I know if Bankruptcy is right for my circumstances?
A: One of our experienced Michigan Bankruptcy Attorneys will be able to evaluate your circumstances (current income, outstanding debt, monthly bills, etc.) and advise you on what program is right for you. At the initial consultation we will discuss your financial goals and develop a personalized plan to get you back on track. » Back to top
Q: I don't really want to file bankruptcy - what are my other options?
A: It depends on your circumstances. In the case of a foreclosure or repossession, you could try to negotiate directly with your creditors. If they agree to work with you and you can afford the terms they offer, then you may not need to file. If you have mainly unsecured debts (i.e. credit card bills, medical bills, etc.) then you could explore a Debt Management program as opposed to Chapter 7 ";Fresh Start"; or Chapter 13 ";Reorganization";. The disadvantage of the Debt Management programs is that they do not guarantee that your creditors will agree to accept proposed terms and/or stop collection efforts or creditor actions.
We encourage all of our clients to explore all of their available options before determining the best course of action. We provide an honest assessment of your circumstances at the initial consultation and we will advise you of all your available options and discuss what makes the best sense based on your personal circumstances. If bankruptcy is not right for you - we will tell you. The decision to file for bankruptcy is typically not the first choice, but sometimes it is the best choice. » Back to top
Q: Will my legal rights be affected if I file for bankruptcy?
A: No, bankruptcy is a civil proceeding. » Back to top
Q: I have heard that the laws changed for Bankruptcy...can I still file?
A: Yes, the laws changed on 10/17/05. However, Chapter 7 and Chapter 13 are still available. Most people were unaffected by the change in legislation. To see if you would qualify under the new laws, we offer complimentary consultations. We will discuss your options and develop a personal strategy to improve your financial situation. » Back to top
Q: Do I need an Attorney's help to file for bankruptcy?
A: You are not required to have an Attorney, although it is advisable. The laws are complicated and it can be costly and detrimental to your circumstances if mistakes are made or deadlines are not met. One of our experienced Bankruptcy Attorneys will be able help guide you through the process and relieve the stress you may be feeling from your financial situation. Our job is to make your life easier and that is why our firm specializes in this area of the law. » Back to top
Q: I heard that I have to complete a credit counseling class before I can file? What does this mean?
A: Under the new bankruptcy code, debtors are required to complete Pre-filing Credit Counseling with an approved agency before he or she can file for bankruptcy. This may sound complicated, but it is a simple phone or internet consultation that lasts less than an hour and can be completed at our office. The cost is $25.00 - $50.00 and some debtors may qualify to have this fee waived based on their income. It is also required that debtors complete a personal financial management course with an approved credit counseling agency before being eligible to receive a discharge from a Chapter 7 or Chapter 13. Again, this is a straightforward process that can be completed easily for an additional cost of $25.00 - $50.00 for one person or $60.00 for two. We provide our clients with coupons to get discounted rates on the required counseling. » Back to top
Q: I already filed Bankruptcy. Can I file again?
A: You can file Chapter 7 Bankruptcy once every eight years. If you filed Chapter 7, you eligible to file for protection under Chapter 13 as soon as your receive your discharge. » Back to top
Q: If I file bankruptcy, will the creditors stop contacting me?
A: The law requires creditors to immediately stop trying to collect on debts once a bankruptcy case is filed. This is called the automatic stay. If they do call, simply give them your case number and filing date, and refer them to our office for additional information. » Back to top
Q: How long does bankruptcy appear on my credit report?
A: It is reported for 7-10 years. However, bankruptcy does not AFFECT your credit for that length of time. The Chapter 13 is designed to help you to immediately begin improving your credit be re-establishing a regular payment history and working to reduce your overall debt load. After the discharge in a Chapter 7, you can begin immediately rebuilding your credit by establishing wise credit choices. You could expect to qualify for a conventional mortgage within two year, if you would otherwise qualify. » Back to top
Q: If I file bankruptcy, is my spouse required to file with me?
A: No. We will help you determine if it makes sense for you both to file or if it is to your advantage to designate one filer based on the nature of your debts. » Back to top
Q: What if my debt has a co-signer - do they have to file as well? Will he or she still be obligated on the debt?
A: No, a co-signer does not have to file the case with you in order to protect your property or set up repayment terms. If the debt is being paid in full through the plan, the co-debtor is released from further obligation once the debt has been fully satisfied. If the debt is not paid in full through the terms of the plan, the creditors can collect the unpaid balance of the debt from the co-signer. » Back to top
Q: What is a discharge?
A: A discharge is a court order that releases a debtor from any further obligation for all dischargeable debts included in the case. Once a debt is discharged, it is no longer legally enforceable against the debtor and the associated creditors are barred from trying to collect such debts. » Back to top
Q: Are some debts non-dischargeable?
A: Yes, for example, you cannot receive a discharge on alimony or child support. Also, government insured student loans are generally non-dischargeable although in some cases, you may qualify for a hardship discharge. Most tax liability is non-dischargeable unless the tax debt is over three year old and the tax returns for those years were filed more than 2 years ago (this is a confusing concept so please call our office for more information on this subject). Also, some debts may be non-dischargeable in a Chapter 7 Bankruptcy, but are dischargeable in a Chapter 13 Bankruptcy. Each must be evaluated on an individual basis. » Back to top
Bankruptcy and Your Home
Q: Can a bankruptcy stop a foreclosure sale on my home?
A: Yes, if the necessary paperwork is filed PRIOR to the foreclosure sale date and you qualify to file based on your income. » Back to top
Q: What if I can no longer afford my house or car?
A: If you cannot afford or do not wish to keep the property any longer, you can surrender it to the creditor or let the foreclosure/repossession occur. In the case of a foreclosure you often have a "redemption period" in which to continue living in the house. You are able to sell the house before the expiration of the redemption period if you can pay off the lender in full. Remember that charges are still accruing even after the foreclosure sale, so make sure that you have an accurate pay-off before agreeing to terms of the sale.
If you voluntarily surrender (or experience repossession on) a vehicle because you can no longer afford it, the lien holder will likely charge you with a deficiency balance of the loan. That is, the difference between what you owed on the loan and what they were able to sell it for at public auction.
In the cases of high deficiency balance(s), second mortgages on your home that are not included in the foreclosure or a judicial foreclosure - you may want to file Chapter 7 to discharge these debt obligations. » Back to top
Q: Will I ever be able to buy a house after I file for Bankruptcy?
A: Most mortgage companies tell us that after 2 years (if not sooner) bankruptcy doesn't hurt your chances of buying a home, so long as you are otherwise qualified. If you are in an active Chapter 13 case, you can re-finance at any time during the process. » Back to top
Q: Will I qualify to refinance since I am in a bankruptcy?
A: Your Chapter 13 will serve as its own credit source. This means that a new lender will look at your performance in the Chapter 13 to qualify you for a new loan. If you have been making your payments on time and in full, a lender will evaluate you on this basis versus perhaps a poor pay history prior to your Chapter 13 filing. Lenders typically like to see at least 12 months of positive payment history in the Chapter 13 before qualifying you for a new loan. Obviously there are other factors for the lender to consider including how much equity you have in your home, other debts that you may have, etc. » Back to top
Bankruptcy and Your Car
Q: Will I be able to finance a new car after Bankruptcy?
A: Yes, with qualified income. However, you will probably be charged a higher rate of interest. » Back to top
At Acclaim Legal Services, our bankruptcy lawyers will review your financial affairs and advise you on whether Chapter 7 or Chapter 13 bankruptcy is an option for you. Contact Acclaim Legal Services today. Your initial consultation with a bankruptcy attorney is free. Call 866-438-5217.