If you’re considering bankruptcy, choosing between Chapter 7 and Chapter 13 is a critical decision. You might be wondering: What are the differences between Chapter 7 vs. Chapter 13 in Michigan?
The biggest difference is that Chapter 7 eliminates unsecured debts through liquidation, while Chapter 13 allows you to reorganize your debts into a structured repayment plan.
- Chapter 7: Discharges unsecured debts (credit cards, medical bills, personal loans) but may require selling non-exempt assets.
- Chapter 13: Lets you keep your property while making structured payments over 3–5 years to catch up on secured debts like a mortgage or car loan.
With decades of experience assisting Michigan residents through bankruptcy, I’ve helped countless individuals determine which option best suits their financial situation. Let’s break down the key differences and eligibility requirements for both Chapter 7 and Chapter 13 in Michigan.
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FAQs About Chapter 7 vs. Chapter 13 in Michigan
What is the main difference between Chapter 7 and Chapter 13 bankruptcy?
Chapter 7 eliminates unsecured debt by liquidating non-exempt assets, while Chapter 13 reorganizes debts into a repayment plan and allows you to keep your assets.
Which bankruptcy chapter is faster to complete?
Chapter 7 is quicker, generally taking 4–6 months to complete, whereas Chapter 13 extends over a period of 3–5 years.
Can Chapter 13 bankruptcy stop foreclosure?
Yes. Chapter 13 allows you to catch up on mortgage payments and prevent foreclosure through a repayment plan.
Do I need regular income to file for Chapter 7?
No. Chapter 7 does not require regular income but does require passing the means test.
Can I discharge taxes through Chapter 13?
Yes. Chapter 13 can help discharge certain taxes that are not eliminated in Chapter 7.
What happens to secured debts in Chapter 7 vs. Chapter 13?
In Chapter 7, you must stay current on secured debts to keep property, while Chapter 13 lets you catch up on arrears over time.
How can an attorney help me choose the right bankruptcy chapter?
An attorney evaluates your financial situation, explains the benefits of each chapter, and ensures you meet eligibility requirements.