Bankruptcy can be an important option for Michigan consumers who need debt relief from unrepayable bills, including medical debt, credit card bills and personal loans. However, once a person has filed for bankruptcy once, there are limitations about whether and how soon they can file again for the same kind of debt relief. Chapter 7 is perhaps the most common type of personal bankruptcy. Referred to as liquidation bankruptcy, it wipes out or discharges most unsecured debt balances, after the liquidation of the filer’s non-exempt assets.
Waiting times after Chapter 7
After one Chapter 7 bankruptcy, people must wait eight years before they can file again for Chapter 7 bankruptcy. However, there are other options that people can take if they need relief from mounting debts, collection calls and potential lawsuits or judgments. Chapter 13 bankruptcy, often called reorganization bankruptcy, can be filed only four years after Chapter 7. Under Chapter 13, the court approves a payment plan that has been submitted by the debtor and that generally lasts for three or five years. Payments are paid to a trustee responsible for distributing them to the creditors.
Benefits of Chapter 13 bankruptcy
Chapter 13 does provide some important benefits to debtors. People can reduce the interest rates, the amount they owe on secured loans, plan for lower monthly payments and extend the time they have to pay down mortgages, tax debts and other significant burdens. Some unsecured debts may be reduced to zero, and a Chapter 13 bankruptcy provides provisions to get out of other costly contracts, such as an unaffordable lease.
After a Chapter 13 bankruptcy, on the other hand, people must wait 6 years to file for Chapter 7. If they want to file for Chapter 13 again, there is only a two-year wait.