Chapter 7 Bankruptcy in Michigan
- Purpose: Known as “liquidation bankruptcy,” Chapter 7 helps eliminate most unsecured debts, like credit cards and medical bills.
- Process: Non-exempt assets (if any) may be sold to repay creditors. However, exemptions often allow people to keep basic belongings.
- Eligibility: Requires passing a “means test” to ensure your income is low enough to qualify.
- Timeline: Typically completed within three to six months.
- Impact: Most debts are discharged, but you risk losing valuable assets, including your home if you’re behind on mortgage payments.
Chapter 13 Bankruptcy in Michigan
Purpose: Called “reorganization bankruptcy,” Chapter 13 is designed for individuals with a regular income who want to catch up on debts.
Process: Establishes a repayment plan spanning three to five years, allowing you to pay off debts while keeping assets like your home.
Eligibility: Requires a steady income and debts within certain limits—secured debts under $1,257,850 and unsecured debts under $419,275 (as of current guidelines).
Timeline: The repayment plan lasts three to five years.
Impact: You keep your assets but must stick to the repayment plan.
Key Difference:
- Chapter 7 focuses on wiping out debts quickly but may involve losing assets.
- Chapter 13 lets you keep your property and repay debts over time but requires a stable income.