What is the difference between Chapter 7 and Chapter 13?
In a Chapter 7, you basically file for bankruptcy, show you are unable to repay your debt, and your debt is discharged. A Chapter 13 requires a payment plan of up to 60 months. Most everyone wants to file a Chapter 7. Get in, get out, and get it over with. But not everyone can do this. In order to file a 7, your income has to be under certain amounts. If you make too much money (if there is such a thing), then the Bankruptcy Court expects you to make some efforts to pay back something to your creditors.
If I file a 13, do I have to pay back all my debt?
Nope. You make your best efforts for the length of the plan to pay back as much as you can. If you don’t pay it all back, the balance is forgiven.
Is this like a 1099c? Will I have to pay taxes on the forgiven debt?
The discharged debt is not taxable income and you will not pay income taxes on it.
What will my Chapter 13 payment be?
I have no idea until I review your income and expenses. The basic formula is this: Net income minus reasonable and necessary expenses = bankruptcy payment. Keep in mind, the Court will expect you tighten your proverbial belt and what you think is reasonable and necessary expenses may not be the same in the Judge’s eyes. A lawyer experienced in 13s will be able to give you a pretty good idea of what your budget should look like in order to be approved.
If I file a Chapter 7, will I lose everything?
No. In Michigan we can use the federal exemptions which are pretty generous and, like most of my clients, you will most likely be able to keep all your stuff.
My spouse doesn’t want to file but I need to. Can I do it without my spouse?
Yes. Your spouse doesn’t have to file with you. However, the non-filing spouse’s income is still taken into consideration in determining eligibility for a Chapter 7 or a Chapter 13. Even if they don’t file. Even if all the debt is yours and you incurred it before you even met your spouse. My advice to someone getting married is if you are thinking about a bankruptcy and you don’t want to bring your debt baggage into the marriage, file before you say “I do.”
There are lot more but these are a good start. If you don’t see yours, let me know and I may add it.
Chris McAvoy is a Taylor, Michigan attorney and consumer bankruptcy lawyer who helps people file Chapter 7 and Chapter 13 Bankruptcy. To find out more about bankruptcy, click here for contact info. We help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, and the Downriver, Michigan area.
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