In Novi, Michigan, bankruptcy is a legal proceeding in which a person or business has some or all of their debts legally excused, when they are unable to pay them. This hopefully allows them to start over with a clean slate and move on, after having learned to better manage their use of credit in the process. Bankruptcy should be treated as an option of last resort, and should not be viewed as a convenient way to get out of debt that you just don't feel like paying. Bankruptcy can have severe consequences, including but not limited to damage to your credit rating. A bad credit score can impact your ability to obtain loans in the future, to rent an apartment, and possibly even your ability to get hired at some jobs (as some employers now run credit checks on prospective employees).

Therefore, it is prudent to consult with an experienced Novi, Michigan bankruptcy attorney, who can advise you of the costs and benefits of bankruptcy. Because the decision to file for bankruptcy depends very heavily on the facts of each individual case, the advice of a Novi bankruptcy attorney cannot be substituted.

Types of Bankruptcy in Novi, Michigan

In Novi, Michigan, there are three basic bankruptcy schemes that are most commonly used. They are known as Chapter 7, Chapter 13, and Chapter 11. Being a product of federal law, the procedural rules governing bankruptcy in Novi, Michigan will be very similar to those in any other part of the United States. Chapter 7 bankruptcy requires the debtor to liquidate some of his or her property, and use the proceeds to pay creditors. While this doesn't sound like much of a relief at first glance, the upshot is that once the eligible property is sold, and the proceeds given to the creditors, all of the debtor's eligible debts are deemed paid in full, regardless of how much the creditors actually ended up getting. Not all of the debtor's property has to be sold off - the debtor will usually be allowed to keep things like a house, at least one car, some types of personal property, retirement accounts, and insurance policies. It should be noted that some debts are not dischargeable, and will have to be paid in full even if the debtor files for bankruptcy. This includes student loans, taxes, and criminal fines.

Under Chapter 13 bankruptcy in Novi, most of the debtor's debt is not discharged. Instead, the bankruptcy court, working with the debtor and participating creditors, work out a payment plan that allows the debtor to pay off most of his or her debts over a longer period of time, thereby theoretically making the debt far more manageable. Once a payment plan is approved by the court, creditors are prohibited from attempting to collect payment under their original agreements that gave rise to the debt in the first place. Chapter 11 bankruptcy is almost exclusively used by businesses, but there is nothing that legally prevents it from being used by individuals, and its use by individuals is very rare. Chapter 11 bankruptcy requires the debtor to come up with a restructuring plan - telling the court how they propose to cut costs, improve their operations, and pay down their debts. The plan has to be approved by a majority vote of participating creditors.

One advantage of Chapter 11 bankruptcy is that it allows a business going through it to continue operations, and to trade its stock.

How Can a Novi Bankruptcy Lawyer Help?

The decision to file for bankruptcy in Novi is not one to be made lightly, and it certainly should not be made without first obtaining the advice of an experienced Novi bankruptcy attorney.