There are any number of reasons that may cause people in Michigan and elsewhere to fall behind on their financial obligations. Those who are struggling with overwhelming debt may consider options such as filing for Chapter 7 bankruptcy in order to regain control of their finances and achieve a fresh start.
According to the U.S. Courts, to be eligible for Chapter 7 protection, people’s current monthly incomes must be below the state median, or their petitions must be determined non-abusive under the means test. Additionally, those who file for Chapter 7 cannot have had another filing dismissed within the previous 180 days because they willingly did not appear before or comply with orders by the court, nor can they have voluntarily dismissed their cases after their creditors pursued property held as collateral through the bankruptcy court. Filers must also complete credit counseling with a state-approved agency within 180 days before submitting their petitions.
The court appoints a trustee to administer Chapter 7 cases and to liquidate the non-exempt assets of filers. The proceeds obtained through the sale of this property is then applied toward their outstanding debts.
According to FindLaw, a discharge hearing is held to deal with people’s remaining debts. Any unsecured debts, those that are not secured by property, may be discharged by the court. This means that the filer is no longer liable for them and creditors are prohibited from pursuing further collection activity for them. Not all debts are dischargeable, however. After a Chapter 7 case, people are still liable for child support, most tax debts, student loans and debts created through fraud. To resolve their secured debts, filers must pay their creditors the value of the property, return the property or reach a new repayment agreement.