What is Chapter 7?
Chapter 13 Bankruptcy and Chapter 11 Bankruptcy require payment plans. Chapter 7 cases do not. In a Chapter 7 Bankruptcy the Bankrupt debtors turn over all of their assets to the trustee who sells them and turns them into cash. Theoretically, if the trustee obtained $1,000.00 in cash from sale of assets, and the debtor had $10,000.00 in debt, each creditor would get ten cents on the dollar. In business cases this is exactly how it works. However in cases involving people the trustee is limited in what he can sell because of exemptions.
Chapter 7 Bankruptcy Exemptions are Bankruptcy laws describing what the Bankrupt debtors may keep and the trustee may not sell. The purpose of exemptions is to allow the debtors a fresh start so they do not have to borrow to start over again. In Michigan the debtor may choose exemptions under state law, or exemptions provided in the Bankruptcy Code. The Bankruptcy Code exemptions are the most generous and will be chosen by most debtors. They will allow debtors to keep up to $40,000 in equity in their home if it is a filing by a married couple. There is an exemption for the equity in an automobile of $3,750.00. There are generous exemptions for clothing, furniture, jewelry, and furs. Finally, there is a wildcard exemption consisting of the unused portion of the home equity exemption of up to $12,000.00 per debtor which can be split up and applied to anything at all. The practical effect of this is that there is generally no property for trustees to administer. This is called a no asset Chapter 7 Bankruptcy. There is one hearing before the trustee where the trustee seeks to find out if there is anything he or she can administer. Assuming that there is nothing to administer a discharge will enter sixty days after the hearing.
For a free consultation regarding Chapter 7 Bankruptcy call a Bloomfield Hills Bankruptcy Lawyer at (248) 432-1612