If you are like many Michigan residents who are experiencing financial difficulties, filing for a personal bankruptcy may be on your mind. How many types of bankruptcy are available to individuals, you may wonder? How will a bankruptcy discharge help me? Is there one form of bankruptcy that is better suited to my circumstances?
As FindLaw explains, two bankruptcy types are generally available to individuals, rather than businesses – Chapter 7 and Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, most debts may be wiped out; whereas in Chapter 13, people have the chance to restructure and repay their debts within a manageable period. These points illustrate the main differences between the two types of personal bankruptcy.
Chapter 7 may be better suited for you if you have little or no income, while Chapter 13 is reserved for those with a regular income. For example, you may have recently lost your job or been divorced, or perhaps you are working while your spouse stays home to take care of the children. You might not have sufficient income to repay your debt through a Chapter 13 repayment plan. In a Chapter 7, most of your assets may be liquidated to repay your creditors before the rest of your debt is discharged.
Many people call Chapter 7 the “fresh start” bankruptcy for these reasons – after your discharge is complete, you start off on a clean financial slate. From this point on, you will be able to rebuild your credit without worrying about how you will be able to pay those looming credit card bills. Many people find renewed hope about their financial futures after going through a Chapter 7 bankruptcy.
Each family’s situation is unique. Therefore, it is important to educate yourself on the options available to you before making a decision, and to understand that this information is not meant to replace the advice of a lawyer.