Frequently Asked Questions about Filing for Chapter 7 & Chapter 13 Bankruptcy in Michigan
You are using credit card to pay for necessities. Filing for bankruptcy can help break the cycle. Most of the time, credit card debt is wiped out in a Chapter 7 bankruptcy.
Your wages are being garnished. Wage garnishment happens when a court issues an order requiring part of your paycheck be sent directly to a creditor that you owe until the debt is resolved. Chapter 7 bankruptcy can end the garnishment permanently.
You have considered all other options. Most people consider bankruptcy as a last option after they have pursued other alternatives, like debt consolidation or withdrawing funds from a retirement account. Debt consolidation doesn't stop the accrual of interest. Retirement accounts are protected in a bankruptcy case. Don't wait until it is too late to consider your bankruptcy options.
How long have you been unemployed? Timing is everything. You may qualify for a particular type of bankruptcy relief based on your sudden reduction in income.
Will you incur more debt before finding a new job? All debts that you owe at the time of filing a case will be included in a bankruptcy. Any new debts that you take after a case is filed will remain your responsibility to pay.
Why should I consider filing for bankruptcy as a first step after becoming unemployed? Filing bankruptcy will prevent judgment liens from seizing your state tax refund. A bankruptcy will also protect your bank account from garnishments, and federal tax liens.
How can I afford to file for bankruptcy if I am unemployed? Suspend payments on your unsecured debts once you decide to file a case. Use cash and debit for the essentials: food and necessary utilities. Save up a small reserve to help get you out of debt, or consider drawing a small amount from a protected retirement asset. Taking this proactive measure will protect your future employment income from the threat of garnishment once you go back to work. Every case is unique.