Washtenaw County Chapter 7 Bankruptcy

Chapter 7 is available to individuals, corporations and LLCs.

Most people who file Chapter 7 bankruptcy do not lose any of their property.

The financial model of a Chapter 7 is similar to the financial model employed when someone dies; when someone dies all their property goes into a “decedent estate.”  The estate has an officer called a personal representative.  The personal representative pays the administrative expenses of the estate (such as burial, funeral , taxes, etc.) and distributes the remaining property to the heirs and devisees of the estate.

In a Chapter 7, all (with some exceptions) of the Debtor’s property legally goes into a “bankruptcy estate.”  Instead of a personal representative, the U.S. Justice Department appoints a Case Trustee (also known simply as a Trustee).  The Trustee seeks to recover property from the Debtor, pay the administrative expenses of the bankruptcy estate, liquidate recovered assets and distribute the funds to creditors.

In individual Chapter 7 the Debtor gets to “exempt” certain property.  This means the Debtor gets to pull back property from the bankruptcy estate.  In Michigan, Debtors can use the federal or the Michigan-specific exemptions.  Usually, this results in the Trustee not being able to recover any assets.

Chapter 7 usually takes 100 – 120 days for the Debtor to receive a discharge.  A discharge is a judicial order that your creditors may never collect on your debts ever again.  There are five common exceptions from discharge in Chapter 7:  income taxes less than 3 years old, debts incurred through fraud, domestic support obligations, domestic property and debt settlements/judgments and most student loans.

There are income limits on one’s ability to successfully get a discharge in Chapter 7.

If one received a discharge in a previous Chapter 7 one must wait 8 years from the previous case’s filing date to file another Chapter 7.  If one received a previous discharge in Chapter 13 one must wait 6 years from the previous case’s filing date to file Chapter 7.

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