Ready to Leave Debt Behind

Written by Channel 8 Cleveland on August 28, 2013. Posted in Bankruptcy lawyers in michigan, Should i file for bankruptcy, When to file bankruptcy

Bankruptcy attorney michigan

History has not always been kind to debtors. In Ancient Rome, creditors could choose to sell their debtors into slavery or kill them. If America followed the same rules today, 43% of American families would be dead or enslaved for spending more than they earn in a year. Fortunately, that’s not the case. Filing chapter 7 bankruptcy or chapter 13 bankruptcy is now an option that enables debtors to discharge civil judgments, wage garnishments, and liens, essentially starting over with a clean slate. The process of filing chapter 7 bankruptcy isn’t easy, though. In this article, we’ll go over some of the finer points of filing chapter 7 bankruptcy.

About Chapter 7 Bankruptcy

Chapter 7 is the single most common bankruptcy chapter filed in the U.S., closely followed by chapter 13 which represented 16% of the Michigan filings for 2011. Chapter 7 is more commonly known as liquidation bankruptcy and involves the sale of a debtor’s non exempt assets by a trustee. Whatever proceeds are obtained by the bankruptcy trustee are then given to the creditors.

Preparing to File

Before filing chapter 7 bankruptcy, a debtor should get all financial records together to fill out the bankruptcy petition, schedules, statement of financial affairs, and any other documents like bank statements, credit card statements, loan documents, paystubs, or other financial records.

Filling Out the Documents

The bankruptcy court clerk’s office can usually provide all the necessary documents in a packet for a fee. They include:

  • Voluntary petition for relief
  • Schedules of assets and liabilities
  • Declarations regarding debtor education
  • Statement of financial affairs

These documents require a debtor to make all financial information available to the bankruptcy court including a list of all property, debts, creditors, income, expenses, and property transfers. The documents must be filed with the clerk of the bankruptcy court with a filing fee.

Passing the Means Test

The means test calculation must be completed before filing chapter 7 bankruptcy. It calculates whether you can afford to pay your debts by annualizing your income for the last six months and comparing it to the median income in your place of residence.

Meeting of Creditors

This is generally viewed as the most stressful part of filing chapter 7 bankruptcy. All creditors listed in the bankruptcy documents are gathered, along with the bankruptcy trustee. The trustee asks the debtor questions about the bankruptcy and the debtor’s financial affairs, sometimes scheduling a second Meeting of Creditors. Creditors may also ask questions about the debtor’s bankruptcy and finances.

Seizure of Assets

Any non exempt property can be seized and sold by the bankruptcy trustee. Exemptions refer to federal or state statutes which allow a debtor to keep certain types of property from seizure, like retirement accounts.

Discharge

If the neither the trustee nor any creditors object to the debtor’s discharge, the bankruptcy court will give the debtor a discharge after the objection date has past. This discharge prevents creditors from attempting to collect any debt against the debtor that arose before the bankruptcy.

Chapter 7 vs Chapter 13

Unlike chapter 7, chapter 13 does not involve liquidation. Instead, the debtor keeps all property, exempt or not, as long as the plan complies with the law. Essentially, it’s a reorganization of debt that allows certain creditors to be repaid over time. For more, read this link.

Comments (5)

  • March 12, 2014 at 1:01 pm |

    That Meeting of the Creditors sounds so scary! Is it just designed to deter people from filing bankruptcy?

  • April 11, 2014 at 3:33 pm |

    That Meeting of the Creditors sounds so scary! Is it just designed to deter people from filing bankruptcy?

  • May 11, 2014 at 8:18 pm |

    That Meeting of the Creditors sounds so scary! Is it just designed to deter people from filing bankruptcy?

  • Don Gregory
    June 10, 2014 at 8:20 pm |

    That Meeting of the Creditors sounds so scary! Is it just designed to deter people from filing bankruptcy?

  • Zachary Cross
    July 10, 2014 at 8:22 pm |

    That Meeting of the Creditors sounds so scary! Is it just designed to deter people from filing bankruptcy?

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