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Are you drowning in debt? Are you struggling to make your mortgage payments? If so, consumer bankruptcy may be an option. If you’re considering bankruptcy, a consultation with a qualified consumer bankruptcy lawyer – that is, a lawyer who specializes in representing individuals – is essential. The lawyers at Lucido & Manzella, P.C. have many years of experience in counseling Macomb County area residents who, because of illness, unemployment or other causes, are no longer able to pay their bills.

For the first meeting with your lawyer, you’ll need to bring information regarding the amount and type of debts you have (mortgage, auto and student loans, credit card balances, etc.), as well as all your sources and amounts of income. Our experienced attorneys will help advise you about your situation and if bankruptcy is an option, determine what type of case to file. For consumers, this usually means either a liquidation proceeding under Chapter 7 of the Code or Chapter 13 reorganization.

There are two main differences:

  • Almost all unsecured and secured debts are eliminated by a Chapter 7 “discharge”, while in a Chapter 13 case, the debtor must repay some portion of his or her debts.
  • In a Chapter 7 case, some of your real and personal property may be subject to “liquidation” (sale) in order to generate money to pay creditors some portion of what you owe. In a Chapter 13 case, you continue to pay your mortgage or car lender or other creditors who have collateral for their loans (called “secured” creditors).

However, the choice between Chapter 7 and 13 is no longer yours alone. In response to industry complaints that borrowers with the ability to repay some portion of their debts were simply “walking away” by filing Chapter 7 petitions, Congress in 2005 enacted a so-called “means test”. If you want to pursue a Chapter 7 bankruptcy, you’ll need to show that you don’t have the financial “means” to successfully complete a Chapter 13 repayment plan.

In a Chapter 7 case, real property and other assets (subject to some exemptions) are sold under the supervision of the court, and proceeds are distributed to creditors in accordance with a “priority” system set forth in the Bankruptcy Code. At the end of this process, you’ll receive a discharge, which frees you from legal liability for all included debts.

By contrast, in a Chapter 13 proceeding, you’ll continue to make court-approved monthly payments to secured and unsecured creditors over the course of your repayment plan. If you complete all of the required plan payments, whatever unsecured debt is left over at the end will generally be discharged. You’ll keep your house, cars and most other property.

The Bankruptcy Code was enacted to provide debtors who are mired in debt a “fresh start”. However, it is a serious step with long-lasting consequences. Talk to a bankruptcy expert at Lucido & Manzella P.C. today to see if it’s the best solution for you. We’re available now at (586) 228-3900.