Bankruptcy is a set of laws that assist people and businesses that owe more money than they can afford to pay. There is a special court that is established to handle bankruptcy matters. The bankruptcy law provides the debtors a fresh beginning by liquidating their assets to pay outstanding money to their creditors. Debtors are also offered by the law a flexible payment plan.
For the people who have not paid their debt, the bankruptcy has two primary purposes. The first purpose of the bankruptcy is to give the creditors a fair share of the money that the people who own the can be able to pay back. Bankruptcy offers people who owe debts a fresh start since their obligations shall be canceled. For the business, the law provides for orderly liquidation and distributions of the proceeds from the settlement to their creditors.
In Michigan, there are two main kinds of bankruptcy that you can choose. Chapter 7 is a type of bankruptcy that is suited for the people and the business. On the other hand, Chapter 13 bankruptcy is a payment plan that is suited for the people who have a regular source of income. For the two types, the creditor will benefit since they will get their money. In Chapter 7, a business or a bankrupt individual is supposed to surrender all their assets; the proceeds are then distributed to the creditors.
If you scrutinize your financial statements and then you realize that you are bankrupt, the best option is to file for bankruptcy. Declaring that you are bankrupt is one of the best ways that you can eliminate your financial setbacks. It is uncomplicated to file for bankruptcy. You can either present your case to either a judge or a trustee, and you will be required to explain how you got into the financial problem. You will then be required to list the value of all the assets that you own.
Filing the petition is necessary because it shall prevent any debt collection actions against the debtors. The entire process will be shifted to the court. So long the petition is active, no creditor is allowed to bring a lawsuit on the court of law. They are even barred from contacting the debtor and demanding for the payment. The clear of the court may send a notification to the creditors.
For the liquidation, your asset will be divided into two categories: the exempt and the non-exempt assets. The exempt asset is the properties such as the clothing and personal items which cannot be sold to realize money to clear the debts. On the other hand, non-exempt are the properties that will be seized by the court and sold to get money to pay for the debt. For the people who choose Chapter 7, they will be allowed to keep exempted assets, and the non-exempt asset will be sold. For the people who opt for Chapter 13, they will be required to clear the debt with a period of three to five years. However, you will not pay the money directly to the credits. You shall pay the trustee who will transfer to the creditors.