Personal Bankruptcy: Overview

Bankruptcy can assist a person in eliminating personal liability on debts. This means that a creditor cannot attempt to collect on debts that are included and discharged in that person’s bankruptcy. Most debts are included in the discharge but some are not (such as child support, taxes, criminal restitution, most student loans, etc.).

Bankruptcy for individuals generally fall into Chapter 7 or Chapter 13 under the bankruptcy code. A Chapter 7 bankruptcy eliminates the debts and there is no payment component. A Chapter 13 bankruptcy eliminates debts but you are required to pay into a plan over a 3-to-5-year period in most situations.

The Chapter 7 has income requirements for eligibility (with some exceptions) which means some higher earners will not be eligible. Most individuals are eligible for Chapter 13 but there are some circumstances where individuals are ineligible because there is a limitation on how much debt you can have.

Both types of bankruptcies allow individuals to retain certain items through bankruptcy using exemptions. In Michigan, the individual filing bankruptcy can use either the Michigan Exemptions or Federal Exemptions but cannot mix and match the exemptions. Many people filing bankruptcy are allowed to protect the majority of their assets through a bankruptcy while still eliminating their debt.

We offer a free consultation where we can discuss how a bankruptcy may or may not be a good fit for you. We promise to provide quality advice so you can determine the best steps to move forward.

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