Do I have to “Qualify” for Chapter 7 Bankruptcy?
Yes. There are specific criteria set under the bankruptcy rules for determining if you “qualify” to file Chapter 7. If you do not qualify, though, you can usually qualify to file Chapter 13.
In Chapter 7 bankruptcy debts are “discharged” and in Chapter 13 Bankruptcy debts are repaid. The bankruptcy rules are set up so that only people “without means” can discharge their debts under Chapter 7. People who make too much money must repay their debts using Chapter 13 (rather than discharge them) – if the truly have the income or the “means” to do so.
The bankruptcy court will use something called the “means test” to decide if your income is low enough for you to qualify to file Chapter 7 bankruptcy.
Are all of my Debts Wiped Out in Chapter 7 Bankruptcy?
Chapter 7 bankruptcy will “discharge” (wipe out) most types of unsecured debt. An unsecured debt is one which isn’t guaranteed by property. An unsecured debts includes: credit card debts, medical bills; and gasoline card debt. (A secured debt is a home or car loan.)
However, some types of unsecured debt is also non-dischargeable (not wiped out) in Chapter 7 bankruptcy. Non-dischargeable debts include: student loans; spousal support (alimony); child support, student loans; and most tax debts. (There are a few exceptions to this in very limited circumstances).
Additionally, you cannot use Chapter 7 to wipe out debts for: recently bought luxury items; and, debts you incurred by fraud (for example, as lying on a credit application).
If I’m Caught Up on my Home Loan (mortgage), can I keep my house 7?
You can only keep your home in Chapter 7 bankruptcy IF all of the “equity” in the home is exempt. This is called the “homestead exemption”.
In Michigan, each homeowner and his or her dependents may exempt up to $37,775 of his or her interest in his or her home. And, if the homeowner is age 65 or older and/or is disabled, then the homestead exemption amount is raised up to $56,650.
“Equity” is the dollar amount difference between what you owe on your mortgage and what the home is worth. For example: if your house is worth $100,000 and you have a balance on your mortgage that you owe of $75,000 – then you have $25,000 equity in your house.
Determining how much “equity” you have in your home can be complicated – especially with the wildly fluctuation home values in Michigan. Our experienced, affordable bankruptcy lawyers can help you figure out how much equity you have in your home for purposes of the Chapter 7 Homestead exemption.
What property can I Keep if I file Chapter 7 bankruptcy?
Chapter 7 bankruptcy law in Michigan – and all other states – allows you to keep certain amounts and certain types of property. The property you can keep is called “exempt” property.
Exempt Property (That You Can Keep) in Michigan Chapter 7 Bankruptcy includes:
- Personal Property
- Pensions
- Public Benefits
- Insurance
Best Southfield Bankruptcy Lawyers
The sooner you file bankruptcy, the sooner you stop garnishments, stop foreclosure actions, stop repossessions and start getting your life back on track. We never want you to delay filing bankruptcy and risk getting further in debt and/or losing your home or car. Call our Southfield Bankruptcy lawyers today to see how we can help you.