Understand Chapter 7
Chapter 7 Bankruptcy Lawyers in Detroit
Serving Wayne, Oakland, and Macomb Counties
Is Chapter 7 Right for You?
Did you know that there is a legal process that allows individuals to eliminate tens of thousands of dollars of debt within six months? This process is called Chapter 7 bankruptcy and is the most common type of consumer bankruptcy filed in the United States.
There are various advantages to filing for Chapter 7. It gives you a fresh financial start by paying off most unsecured debts, such as credit card and medical expenses. It has the ability to put an end to creditor harassment, wage garnishment, and lawsuits. You can also keep some exempt property. Additionally, the entire process is rather quick, taking several months to deliver you immediate financial relief.
Chapter 7 bankruptcy can eliminate various types of unsecured debt, including the following:
- Credit card debt
- Medical bills
- Past-due rent
- Personal Loans
- Some tax debts
- Utility bills
Some people hear “bankruptcy” and immediately imagine losing everything they own in a forced sale. They also imagine a permanently ruined credit score and even a publication that tells all their friends, family, and neighbors that they went bankrupt. These are just a few of the harmful myths that prevent people from filing bankruptcy.
Our Chapter 7 Bankruptcy Services
At WBK Bankruptcy, our attorneys work every day to dispel these myths and help our clients understand the truth about this powerful debt-relief option. Our legal team seeks to educate consumers about bankruptcy in Wayne, Oakland, Macomb, Livingston, and Washtenaw counties. If you are struggling to make ends meet because of staggering levels of debt, let us evaluate your case and determine whether Chapter 7 may provide the financial freedom you need and deserve.
Chapter 7 vs Chapter 13 Bankruptcy
Chapter 7 and Chapter 13 bankruptcy differ from each other in that Chapter 7 allows debtors to discharge unsecured debt like loans, credit card debt, and medical bills. In contrast, Chapter 13 allows you to catch up on secured debts like vehicles or homes to prevent foreclosure or repossession.
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When Should You File for Chapter 7 Bankruptcy
Filing for Chapter 7 is frequently a critical decision for people seeking debt relief, and several factors should be considered before filing. If you have limited income and few assets and are struggling with unmanageable debts, a Chapter 7 bankruptcy may be appropriate. When debts, such as credit card balances, medical bills, or personal loans, have become insurmountable, Chapter 7 is a good option.
Generally, it is advisable to file for Chapter 7 bankruptcy when you’re unable to pay off your debts and meet your basic living expenses. However, the timing should also consider any potential legal complications, like recent large purchases or cash advances that may be scrutinized during the bankruptcy process.
While it is tempting to wait until your financial situation becomes dire, understanding bankruptcy laws and the intricacies of Chapter 7 can help you make an informed decision about when to file. Consulting a qualified Chapter 7 bankruptcy lawyer in Detroit is a crucial step in this process, as they can provide personalized guidance tailored to your circumstances.
Common reasons you might want to wait to file for bankruptcy:
- If you transferred property to a relative or friend within the last year
- If you have paid back a family member or friend recently
- If you are planning to file a lawsuit — you may want to wait until the case has been settled
- If you owe rent to your landlord and you do not have plans to move — try to catch up on the payments
- If you are late on car payments and want to keep the car — try to catch up on payments as well
- If you know that your financial situation will get worse, you may wait a little more before filing — you can only file for Chapter 7 once every eight years, so you may want to wait before getting into more debt.
For experienced advice on your particular situation, speak with a skilled Chapter 7 attorney in Detroit at WBK Bankruptcy, powered by Wolfson Bolton Kochis PLLC.
The Chapter 7 Process
Like other forms of bankruptcy, Chapter 7 begins when you file a document called a petition. You will need to include schedules, which are documents that outline all your financial information (e.g., debts, assets, income, etc.). The court will then determine your eligibility for Chapter 7 by verifying whether you pass the means test.
Filing for Chapter 7 bankruptcy involves several steps:
- Meet with an experienced Chapter 7 lawyer near you to ensure that you are eligible to file. Those who may file can typically: pass the Means Test, have completed an approved credit counseling course within a specific period of time before filing, and have not filed for Chapter 7 in the last 8 years.
- Compile your financial documents from the last 6 months, the last 2 years of income tax returns, copies of bills and debts, as well as asset documentation or anything else related to your finances.
- We can assist you when it comes to completing your bankruptcy petition to ensure that it is correct and that there are no delays. When your petition is filed, an automatic stay goes immediately into effect, stopping most creditors from pursuing any collection efforts.
- A bankruptcy trustee is assigned to your case and they will review your petition, sell your non-exempt property, and distribute the proceeds to your creditors. You do not need to make any contact with your creditors.
- Attend the 341 Meeting of Creditors. Here, the trustee and any attending creditors can ask you questions about your finances and the information in your bankruptcy papers.
- Complete a debtor education course before your debts are discharged.
- When you have fulfilled all the requirements, the bankruptcy court will issue a discharge order, wiping out your qualifying debts.
Remember, each case is unique, and the filing process could vary based on your specific situation. It’s highly recommended to hire a qualified Chapter 7 attorney in Detroit at Wolfson Bolton Kochis to guide you through the process and ensure all procedures are correctly followed.
The means test compares your income to the median income in your state for a household of your size. If you make less than the median, you will generally qualify for Chapter 7. If you make more than the median, you might still qualify, and our attorney can help you perform the calculations to determine your eligibility before filing. Fortunately, there is no debt limit, so you can potentially qualify for Chapter 7 no matter how much money you owe.
If you don’t qualify for Chapter 7, you may consider filing under Chapter 13, which does not have an income limit.
Once the court approves your petition, it will issue a court order called the automatic stay. The automatic stay applies to all bankruptcy cases — not just Chapter 7.
The automatic stay prohibits all collection actions, including:
- Letters
- Phone calls
- Texts
- Lawsuits
- Wage garnishment
- Foreclosure
- Repossession
Typically, this protection will last for the duration of your bankruptcy case. To continue to collect your debt during your bankruptcy case, a creditor or debt collector will need to obtain approval from the court.
Liquidation & Property Exemptions
Chapter 7 is often called “liquidation bankruptcy” because the trustee may seize certain assets and sell them to repay your creditors.
To protect your property, you can use state or federal laws called exemptions, which allow you to exempt (i.e., shield) certain funds and assets from the liquidation process. Most Chapter 7 cases are no-asset cases, which means the filer has no nonexempt assets (i.e., no property that the trustee can sell). Our attorney can help you determine whether you will be able to exempt all your property from liquidation.
Once the liquidation process is complete, the court will discharge qualifying debts. When a debt is discharged, the borrower is no longer legally obligated to pay it, and the creditor can no longer attempt to collect it.
Bankruptcy may discharge the following debts:
- Medical debt
- Credit card debt
- Payday loans
- Utility bills
- Certain taxes
- Student loans (in rare cases)
- Automobile loans and mortgages*
*The court may eliminate your liability for an automobile loan or mortgage, but this does not necessarily mean you will avoid foreclosure or repossession. You will not be legally obligated to continue paying these loans, but, if you defaulted on payments, your lender would still have the contractual right to seize the collateral (i.e., your home or vehicle) after your bankruptcy.
Some debts, such as child support, alimony, and criminal fines or penalties, are non-dischargeable.
Seek the Help You Need from an Experienced Firm
We understand that filing for bankruptcy is a choice that should not be taken lightly. At WBK Bankruptcy, our legal team is happy to provide you with everything you need to know to make an informed choice about your financial future. We can help you determine whether bankruptcy is right for you and walk you through the filing process. We can also help you seek solutions outside of bankruptcy if you decide that it isn’t for you. Don’t hesitate to reach out to learn more during a free consultation with our Metro Detroit Chapter 7 bankruptcy attorney!
Learn everything you need to know from our Metro Detroit Chapter 7 bankruptcy lawyer. Call (248) 247-7070 or contact us online to get started today!