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Deciding on Chapter 7 or Chapter 13

On Behalf of | Oct 23, 2019 | Firm News

If you are a Michigan resident feeling overwhelmed by debt and hassled by creditors, you are not alone. Medical emergencies, loss of a job and other unexpected events can cause you to spiral into debt quickly. At Phoenix Law, we often assist clients in determining whether filing for bankruptcy is the best way to get some breathing room and move forward with their lives.

According to Experian, Chapter 7 and Chapter 13 are among the most common programs used to eliminate or reduce debt. Each has benefits. The details of your situation can help you decide which meets your needs best.

Chapter 7, known as liquidation bankruptcy, includes selling your property to pay off debts. There are state and federal exemptions of specified amounts for automobiles, personal property, jewelry, retirement accounts and health aids. Many people view this as an opportunity for a fresh start.

When you file for Chapter 13 protection, you agree to a court-approved repayment plan. Lasting three to five years, it allows you to catch up on back payments for secured assets, like your home and car. The program may reduce the balance of an auto loan based on the depreciated value. This lower balance makes payments more manageable.

Both programs can include the discharge of credit card and medical debt. Several factors determine your program eligibility, including the following:

  • Income level
  • Disposable income
  • Total unsecured debt
  • Total secured debt

A consumer bankruptcy attorney can help you decide whether filing for Chapter 7 or Chapter 13 is your best option. They can also work with you in developing a proposal for debt repayment for the court’s review. Visit our webpage for more information on this topic.