What is bankruptcy and when is it the right choice?
Bankruptcy is in the news frequently, with brick-and-mortar retail businesses and restaurants going under as well as individuals filing for personal bankruptcy. Bankruptcy sometimes has negative preconceptions, that it will ruin a person’s credit, that they will have to give up their home, their car or their possessions, or that they will never be free of debt to creditors.
For Michigan residents struggling to stay afloat during tough economic times, sometimes bankruptcy is actually the best choice for debt relief. It can be beneficial to first get information on debt relief options for your unique financial situation.
Will bankruptcy offer debt relief?
Bankruptcy is a federal law that allows businesses as well as individuals either debt relief or debt management solutions. The two main types of personal bankruptcy for individuals and couples are Chapter 7 and Chapter 13. Depending on the personal bankruptcy filing, unsecured debt such as credit card or medical bill as well as some IRS tax debts may be eligible for discharge.
In a Chapter 7 bankruptcy, after the petition is filed the court puts an immediate stay to temporarily stop creditor harassment, wage garnishment or foreclosure proceedings. Many if not all unsecured debts are discharged in this type of proceeding, including credit card and some if not all medical debt. The individual may keep all exempt property, but all non-exempt property will be liquidated.
A Chapter 13 bankruptcy filing will offer some debt relief through financial management that is overseen by a court-appointed trustee. This kind of bankruptcy will also immediately halt foreclosure proceedings and allow people to catch up on back payments over time through a structured repayment plan.
Some advantages of this kind of filing are the elimination of service and late charges as well as penalties, stripping off of second mortgages, cancellation or decrease of unsecured debt and protection of equity in real estate, stocks and bonds, IRAs and insurance policies.
How do I know when it’s time to file?
If lenders are garnishing your paychecks and you have fallen seriously behind in car or mortgage payments, can no longer pay of monthly credit card statements or are dipping into retirement savings, it might be wise to consider debt relief options. The passionate and skilled bankruptcy attorneys at Roose Law PLC provide debt relief counsel in Eastern Michigan. They will also work with lenders and, if necessary, defend your financial interests in court.