Chapter 13 Bankruptcy is a form of bankruptcy which allows individuals to get a fresh start by paying off some of their outstanding debts. Chapter 13 allows individuals to keep their property and repay debts according to a court-approved plan.
When should I file Chapter 13 Bankruptcy?
The most common circumstances under which a person files for Chapter 13 are:
- A person wants to save their home from foreclosure and catch up on their payments.
- A person is behind on a car note or lease and the vehicle is in danger of being repossessed.
- A person has valuable nonexempt property which would be lost in a Chapter 7 bankruptcy filing.
- A person has sufficient income with which to repay most debts, but needs temporary relief from creditors in order to do so
- A person has a tax obligation, student loan or other debt that is non-dischargeable in a Chapter 7 bankruptcy.
- A person is not eligible for a Chapter 7 discharge in Michigan.
How does Chapter 13 Bankruptcy Work?
The most important part of a Chapter 13 Bankruptcy is developing a repayment plan. The repayment plan will describe which creditors are going to get paid and how much. The plan must show that any disposable income you have at the end of the month goes toward paying unsecured creditors (i.e. medical and credit card debt). To become effective, a Chapter 13 plan must be approved by the court. If all elements of the repayment plan are met, the person is no longer liable for the remainder of his or her dischargeable debts.
How much is my Chapter 13 payment?
This varies drastically depending on your specific needs. Generally, all of the disposable income of the debtor and the debtor’s spouse must be paid into the Chapter 13 payment plan. Disposable income is determined by taking the household income and subtracting the reasonably necessary expenses required for the household. We will develop a detailed budget to submit to the court and the Trustee.
How long does a Chapter 13 last?
The length of a Chapter 13 case depends on a number of factors. Most plans will range between three and five years. Typically, if you are over median, you’ll have a five-year plan. If you are under median, a plan of three years can be proposed.
When do I need to start making payments?
The first payment needs to be made to the Chapter 13 Trustee within 30 days after the filing of the case. In most cases, the court requires us to set up a payment order through your employer.
What if I can’t make the plan payments?
Life happens, and we understand that. If you’re no longer able to make your Chapter 13 payments according to the plan, it’s important to contact our office immediately. We may be able to do a plan modification in order to lower your payments. If that does not solve the problem conversion of your case to a Chapter 7 bankruptcy or dismissal may be in order.
What if I need to get a new car or incur new debt after I file?
If you need to purchase a new vehicle, change residences, or renew a new lease, please contact our office immediately. Prior to incurring new debt, the approval of the Chapter 13 Trustee should be obtained.
For more information on the protections available under Chapter 13 bankruptcy, schedule a FREE CONSULTATION with Detroit Lawyers.