Are you considering filing for bankruptcy in Michigan? Bankruptcy is a legal process that involves either eliminating or reorganizing your debts. Depending on your circumstances, you may be eligible for either Chapter 7 or Chapter 13 bankruptcy. Knowing the differences between these two types of bankruptcy can help you make an informed decision about which one is right for you. In this blog post, we’ll explore the main differences between Chapter 7 and Chapter 13 bankruptcy, and who is best suited to file for each one.

Chapter 7 Bankruptcy:



Chapter 7 bankruptcy, also known as “liquidation” bankruptcy, involves selling off all non-exempt assets to pay off as much of your unsecured debt as possible. Any remaining unsecured debts, such as credit card debt, medical bills and personal loans, are then discharged. This type of bankruptcy is typically best suited for those who don’t have a lot of valuable assets, and whose income is below the median level in their state. 

One of the biggest advantages of Chapter 7 is that it allows you to start over with a clean slate. Within a few months after filing, most of your debts will be discharged, giving you a fresh start. However, Chapter 7 also comes with some disadvantages. For example, it can negatively impact your credit score for up to 10 years. Additionally, not all debts are dischargeable under Chapter 7, such as most taxes, student loans, and child support payments.

Chapter 13 Bankruptcy:

Chapter 13 bankruptcy, on the other hand, involves reorganizing your debts and paying them off over a period of three to five years. With Chapter 13, you don’t have to sell off any assets, but you do have to have a regular source of income to make the payments. This type of bankruptcy is best suited for those who have a regular income and who want to keep their assets, such as a house or car.

One of the biggest advantages of Chapter 13 is that it allows you to keep your assets while still paying off your debts. Additionally, it can be a good way to stop foreclosure on your home, as it allows you to catch up on missed mortgage payments. However, Chapter 13 also has its disadvantages. The process is much longer and more complicated than Chapter 7, and you will need to have a steady source of income to make the payments.

Who Should File for Chapter 7 Bankruptcy?

Generally, those who have a low income and who don't own a lot of valuable assets are best suited for Chapter 7 bankruptcy. If you're struggling to make ends meet and are being harassed by debt collectors on a regular basis, then Chapter 7 may be the right choice for you. It's important to note, however, that not everyone is eligible for Chapter 7, as it involves a means test to determine whether you have enough income to pay off some of your debts.

Who Should File for Chapter 13 Bankruptcy?

Chapter 13 is best suited for those who have a regular income and who want to keep their assets. If you're behind on your mortgage or car payments, or if you have non-dischargeable debts, then Chapter 13 may be the right choice for you. It's important to note, however, that you will need to have a steady source of income to make the payments, and you will need to stick to a strict budget for several years.

Filing for bankruptcy can be a complex and overwhelming decision, but it can also be the best way to get your finances back on track. Knowing the differences between Chapter 7 and Chapter 13 bankruptcy is essential to making the right decision for your situation. If you're considering bankruptcy in Michigan, don't hesitate to contact The Law Offices of Ronald Siegel, PC. Our experienced attorneys can guide you through the process and help you get the fresh start you need.