Chapter 7 is the first type of bankruptcy that comes to mind to most people contemplating solving their debt problems. In this case, as in Chapter 13, you list your assets and match them up, if you can, with exemptions.
Exemptions are the property you can keep for your fresh start. They are different from state to state and even in Michigan, where we practice, there are many choices to consider. For instance under the Federal Exemption scheme you can exempt or keep a house up $22K in equity per person (whose name is on the house). Under state law the exemption varies depending on the age or disability of the debtor.
Most of the time there is an exemption for every asset. If that is true in your case, you will be labeled a "No Asset" case in the lingo used by the court. That means you keep everything, at least if you own it and there is no lien. There are, however, three parties to consider, you, the court, and the creditor. The court might decide that it will take no action on your collateral, but the creditor with a proper lien can and will expect that you will either make a repayment agreement or surrender the item back.
Some debts you cannot discharge. That means after your case is over, the creditor can still collect if you can pay. The most obvious is child support. Others that are usually, but not always, not discharged are taxes and student loans. There are references to criminal fines, divorce obligations, fraudulent debts and a few others. Sometimes we will file a bankruptcy mini lawsuit to decide if you can get out of a debt. Sometimes your creditor will have to file this "adversary action" to prove that you still owe the debt. The most common adversary actions are those where the creditor claims you charged up your credit cards knowing or thinking about filing bankruptcy. The truth is that probably less than 2% of chapter 7 cases have an adversary action that needs to be decided.
One of the considerations you must evaluate is if you could afford a Chapter 13. If you earn more than you spend after you wipe out your debts, you could decide or be forced to suggest a Chapter 13 repayment plan. Keep track of everything you and your family spend money on to see how your budget is working for you. A Chapter 13 is not the worst thing in life, and it can solve problems a Chapter 7 cannot.
To help ease the stress of considering your options, we offer a free 15 minute consultation. Call Van Epps & Van Epps today at (989) 723-6777, or complete the contact form provided on this site to arrange for your free consultation.
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