bankruptcy—also known as liquidation or straight bankruptcy—is a process where you can ask a bankruptcy court to wipe out most of your debts. This can help you start over. A judge will review your case and accept or deny the request.If approved, the court puts an automatic temporary stay in place that stops creditors from trying to collect payments or take action. This can include wage garnishment, repossession, or foreclosure while your bankruptcy case is pending.
Chapter 7 bankruptcy provides immediate relief to people in serious debt, regardless of the amount of debt. But some drawbacks exist.
Filing for bankruptcy protection negatively affects your credit score and credit report for many years. You could lose certain non-exempt assets that are sold or liquidated to repay your creditors. But most assets are considered exempt and not subject to liquidation.
The liquidation process generally involves three steps:
Your non-exempt assets are sold
Your creditors and lenders receive payment from the sold property
You are freed from most remaining unsecured debts and can start over
Remember that your student loans, tax debt, and other types of secured debt are not dischargeable. You will still need to repay these unless you can show extraordinary circumstances. Most consumer debts, though, like medical bills, personal loans, and credit card debt, are dischargeable.
In today’s economic conditions, many business owners, small and large, find themselves overwhelmed by financial difficulties. Under federal law, a person, typically a business or partnership, may attempt to suspend their credit obligations by filing a claim under Chapter 11 of the United States Bankruptcy Code. Usually, a person who files for debt relief in Michigan under Chapter 11 retains control of their assets and possessions while their enterprise undergoes restructuring. During this time, any litigation that has been brought against the business owner, who under Chapter 11 is referred to as the debtor in possession, receives an automatic stay or, in other words, is placed on hold until the claim has been resolved. A debtor in Chapter 11 may continue to operate its business while the court proceedings are pending.
bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years based on the income they earn. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years.
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