It’s tough to figure out what to believe when your finances are stressing you to overload.  Debt collectors often stretch the truth or outright lie to intimidate you.  Debt collector lies about bankruptcy can usually be broken into two broad types – TYPE A and TYPE B.

DEBT COLLECTION MISTRUTH -TYPE A: “We’ve researched your financial situation, and you won’t qualify to file bankruptcy.”

This makes you (the debtor) feel like you don’t have any other options.  Maybe you remember the media coverage of the 2005 bankruptcy reforms – which makes this statement seem like it should be true. You may have a broad understnding of the new bankruptcy laws  – and you make “think that the debt collector is right on target”.  The truth is, it only sounds like the truth. Debt collectors do not legally have enough information to know whether you “qualify for bankruptcy”.

The Chapter 7 means test is a calculation involving income, the median income in Michigan, and expenses based on a combination of IRS, local, and actual numbers. Reports from U.S. Trustee certified Credit Counseling agencies show that more than 96% of the people who come to them considering bankruptcy qualify for Chapter 7 bankruptcy, and even those few who don’t can likely file under Chapter 13.

DEBT COLLECTION MISTRUTH -TYPE B: “You can’t file bankruptcy on that type of debt anymore.”

This outright mistruth serves two purposes: To convince you (the debtor) that you are stuck with your debt, and that you must make “this particular debt” a priority. Another words, they are trying to make you think that the “debt in question” is different than your other debts and you better pay it special attention.  Most debt collection calls relate to credit card and other unsecured debt, nearly all of which is dischargeable in bankruptcy

• Credit card debt is still dischargeable in bankruptcy.
• Medical bills are still dischargeable in bankruptcy.
• Deficiency judgments relating to repossessions or mortgage foreclosures are still dischargeable in bankruptcy.

Debt collectors are not a good source of information about bankruptcy law and options.

The best source of information about bankruptcy is a local bankruptcy attorney like Chimko &Associates. Consumers can also take advantage of the extensive general information about Chapter 7 bankruptcy, Chapter 13 bankruptcy, debt collection practices, dischargeable debts, and more at Chimko & Associates.

We all know that bankruptcy used to have a notorious reputation. But things are changing—due to the recession, more and more people are taking a closer look at what bankruptcy has to offer.

In fact, bankruptcy-filing rates have risen in all 50 states including Michigan from the same time last year.

Considering more than one million Americans filed bankruptcy in 2008, that’s a significant statistic.

Many Michigan folks are turning to bankruptcy because it provides the protection of the automatic stay.

The automatic stay is a court order that’s typically issued immediately after the bankruptcy petition is filed. 

The stay prohibits creditors from further pursing debt collection efforts and has the power to:

1. STOP Foreclosure
2. PREVENT Repossession
3. HALT Lawsuits & Wage Garnishments
4. STOP Utility Shutoffs

If this sounds like the kind of relief you are looking for, read on to learn more about the two main types of personal bankruptcy: Chapter 7 and Chapter 13.

Michigan Chapter 7 Bankruptcy

This type of personal bankruptcy offers filers a discharge (elimination) of many types of unsecured debts. Unsecured debts are considered debts that aren’t tied to property, such as:

1. credit card bills
2. utility bills
3. payday loans
4. medical bills
5. parking tickets, etc.

Under Chapter 7 bankruptcy, the bankruptcy trustee has the right to liquidate (sell) a debtor’s non-exempt property in order to repay creditors. 

For this reason, Chapter 7 is typically best for people who have little or no income and rent or own a home with little equity.

A person must qualify to file this type of bankruptcy by taking the Chapter 7 means test, which determines whether a person really needs to file Chapter 7 or whether they can afford repaying their debts through Chapter 13 bankruptcy.

Michigan Chapter 13 Bankruptcy

The other form of Michigan bankruptcy is Chapter 13 bankruptcy, which deals with setting debtors on a repayment plan. This repayment plan is agreed upon by the debtor, his or her bankruptcy lawyer, the bankruptcy court and the debtor’s creditors. Under the Chapter 13 repayment plan, the debtor makes one lower monthly payment to the bankruptcy court. There is no direct contact with creditors.

During the repayment period, the debtor is typically allowed to keep his property (such as his home or cars), as long as he remains current on payments.

At the end of the repayment plan (which generally lasts between three and five years), the bankruptcy court has the option to discharge the debtor’s remaining unsecured debts.

Chapter 13 is often an attractive bankruptcy option for people facing foreclosure of their home or repossession of their cars or other property.
 
Unlike Chapter 7, there’s no test a person must take to file Chapter 13, but they will likely need a steady income so they can keep current with their repayments.

Bankruptcy Questions?

If you’re considering filing bankruptcy, a bankruptcy lawyer can be a good person to talk to about your options. 
A Michigan bankruptcy lawyer can help you determine which type of personal bankruptcy (if any) may be best for your circumstance.