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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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I have a lot of credit card debt. I am wondering if i should

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I have a lot of credit card debt. I am wondering if i should do a debt consolidation program or file for bankruptcy. I live in Michigan. I have approx 45,000 in unsecured debt. My husband is looking at a lay off and we are already struggling while he's working.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  FiveStarLaw replied 4 years ago.
Hello,

You may want to consider a chapter 7 bankruptcy. I will explain.

A Chapter 7 bankruptcy could discharge (erase) all of your unsecured debt such as credit cards, judgments and personal loans. It would be an opportunity for a fresh financial start.

Here are the exemptions for Michigan:
http://www.bankruptcyinformation.com/mi_exemp.htm



Best wishes for a successful outcome. If you have additional questions, please do not hesitate to submit them to me directly.


Thank you,
FLAandNYLAWYER
Customer: replied 4 years ago.
what about my car loans and house loans are those safe from that?
Expert:  FiveStarLaw replied 4 years ago.
Yes, provided that they are up to date and your equity does not exceed the exemptions -
Customer: replied 4 years ago.
so with Chapter 7 am i obligated to pay any of the debt back? and can they take any assets? and this is on my credit for 7 years? whats the difference btw 13 and 7
Expert:  FiveStarLaw replied 4 years ago.
Hello,

As an individual, there are two types of bankruptcy available. A Chapter 7 and a Chapter 13. There are distinct differences in between a Chapter 7 and a Chapter 13 bankruptcy.



A Chapter 7 bankruptcy could discharge (erase) all of your unsecured debt such as credit cards, judgments and personal loans. It would be an opportunity for a fresh financial start. However, you may have to surrender assets, if any, that exceed your exemption.


A Chapter 13 bankruptcy is a repayment plan for an individual. It may require that you repay some of your unsecured credit card debt over a 3 -5 year period. However, you may retain assets that exceed your exemption.


Here are the exemptions for Michigan:
http://www.bankruptcyinformation.com/mi_exemp.htm


J.A. policy requires that you start a new thread for a new question. Please accept the answer and then you may start your new question in a new thread
Customer: replied 4 years ago.

J.A. policy requires that you start a new thread for a new question. Please accept the answer and then you may start your new question in a new thread

 

Why did you state that? Did i start a new question?

Expert:  FiveStarLaw replied 4 years ago.
Yes you started two new questions. But no worries I answered one above (whats the difference btw 13 and 7) and I will answer the other now.

and this is on my credit for 7 years?
It may remain on your credit record for ten years.
Customer: replied 4 years ago.
Wow...i've never had anyone so technical about my questions...I figured they were all related to the same topic. I wanted to get more explanation out of the question, more than i could have gotten from google. Thanks anyways
Customer: replied 4 years ago.
Relist: Very vague, wasn't good about letting me ask related questions to get a better understanding about my situation.
Very vague, wasn't good about letting me ask related questions to get a better understanding about my situation
Expert:  cfortunato replied 4 years ago.
Hi JACustomer,
I can continue to help you if you need further assistance. Please let me know.
Thank you!
Customer: replied 4 years ago.
I do, i am very confused about what to do.....I really didn't want to file bankrupcy but might be my only option
Expert:  cfortunato replied 4 years ago.
In my opinion, Bankruptcy is always preferable to a debt consolidation program, because debtors in debt consolidation programs often find that even after a year or 2 of making the payments, the credit card balances go down little, if at all. (There are many disreputable debt consolidation companies that keep all or most of the payments.)
However, Bankruptcy is not always feasible, for instance if the debtor's income is too high, or if the debtor owns too much equity. The main sources of equity are one's home and car(s).
Do you own your home? If so, how much equity does it have (what is the difference between what it can be sold for, and the balance on the mortgage)?
Do you own a car(s)? If so, about how much equity do the cars have?
Customer: replied 4 years ago.

We own a home, 1st mortgage is 218,000 second mortgage is 29,000 home is probably only worth 250,000 in our market.

 

We both have new vehicles. Both have outstanding balances around the 30,000 mark. probably no equity into either vehicle.

 

We have an old restored 78 chevy vehicle that is paid, probably worth 8-9000. Have it for sale at 9000 with no bites for the last 6 months.

Expert:  cfortunato replied 4 years ago.
In Michigan, the debtor can choose state or federal exemptions. The federal exemptions allow you to apply part of the homestead exemption to property if not being used for the homestead (which you should not have to, since your home has no equity). This means you would be able to apply part - up to 10,825 - of the homestead exemption to the car that is worth about $8000 - $9000 to keep it.
Additionally, you would be able to keep the cars since they have no equity.
I have a feeling that I did not completely answer your question as Bankruptcy is an overwhelming subject, and there is a lot going on with it. Please take your time digesting my answer, and feel free to ask for additional information.
Thank you!
Customer: replied 4 years ago.
It is so much to take in. Like i said i'd love to find another way out, it's just not happening. So pretty much since i have no equity in my vehicles or home they would be safe? Do I have to be behind on my mortgage to file bankrupcy? i was told i had to? would it be better to let my cards go unpaid for a while and try a settlement with the cards instead?
Expert:  cfortunato replied 4 years ago.
Yes - since there is no equity in the home, and no equity in the cars, those would be safe.
You do not have to be behind in the mortgage in order to file.
If a debtor misses a few credit card payments, the credit card company(ies) will often offer a debt settlement to the debtor, whereby they will allow the debtor to pay 60% of the outstanding balance. However, when this happens, they will demand that the 60% be paid in full - they will not allow payments. If you do not have this kind of money available, a settlement will not be an option.
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and 4 other Bankruptcy Law Specialists are ready to help you
Customer: replied 4 years ago.
thank you you have been a lot more helpful! I appreciate you taking the time to outline my questions. Hopefully a job will come up and we won't have to do this. But knowing a little more about it, is helpful!
Expert:  cfortunato replied 4 years ago.
You're welcome! And thank you for accepting my answer!

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