Chapter 13 Bankruptcy Legal services

What is a Michigan Chapter 13 Bankruptcy?

Chapter 13 Michigan Bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. When filing for Chapter 13 Bankruptcy in Michigan, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” If the debtor’s current monthly income is greater than the applicable state median, the plan is usually must be for five years. In no case may a plan provide for payments over a period longer than five years. During this time the law forbids creditors from starting or continuing collection efforts.

There are many advantages to individuals for consulting with a lawyer and filing a Michigan Chapter 13 Bankruptcy over a Chapter 7 Bankruptcy. Most importantly, Chapter 13 Bankruptcy offers individuals an opportunity to save their homes from foreclosure. Individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time by filing under Chapter 13 Bankruptcy. Nevertheless, all mortgage payments that come due must be made on time during the Chapter 13Bankruptcy plan. Chapter 13 Bankruptcy also gives individuals the opportunity to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the Chapter 13 Bankruptcy plan. Doing this may lower the debt payments. Chapter 13 Bankruptcy also has a special provision that protects third parties who are liable with the debtor on “consumer debts.” This provision may protect co-signers. Finally, Chapter 13 Bankruptcy acts like a consolidation loan under which the individual makes the plan payments to a Chapter 13 Bankruptcy trustee who then distributes payments to creditors. Individuals have no direct contact with creditors while under Chapter 13 Bankruptcy protection.

Who is eligible to file for Chapter 13 Bankruptcy in Michigan?

A corporation or partnership may not file for Chapter 13 Bankruptcy in Michigan.
Any individual, including the self-employed or those operating an unincorporated business, is eligible to file for Chapter 13 Bankruptcy in Michigan providing: the individual’s unsecured debts are less than $336,900 and the individual’s secured debts are less than $1,010,650. These amounts are adjusted periodically to reflect changes in the consumer price index.

However, an individual cannot file for Chapter 13 Bankruptcy if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. In addition, no individual may be a debtor under Chapter 13 Bankruptcy unless he or she has, within 180 days before filing, received credit counseling from an approved credit-counseling agency either in an individual or group briefing. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

What are the steps in filing for a Michigan Chapter 13 Bankruptcy?

A Michigan Chapter 13 Bankruptcy case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs. The debtor must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. The debtor must provide the Michigan Chapter 13 Bankruptcy case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). A husband and wife may file a joint petition or individual petitions.

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:

A list of all creditors and the amounts and nature of their claims;
The source, amount, and frequency of the debtor’s income;
A list of all of the debtor’s property; and
A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household’s financial position. A lawyer can advise about how to fill out this information and file it properly with the proper Michigan Court.

When an individual files a Michigan Chapter 13 Bankruptcy petition, an impartial trustee is appointed to administer the case. In some districts, the U.S. trustee or bankruptcy administrator (2) appoints a standing trustee to serve in all Chapter 13 Bankruptcy cases. The Chapter 13 Bankruptcy trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors.

Filing the petition under a Michigan Chapter 13 Bankruptcy “automatically stays” (stops) most collection actions against the debtor or the debtor’s property. Filing the petition does not, however, stay certain types of actions (which a lawyer can explain) and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Chapter 13 Bankruptcy in Michigan also contains a special automatic stay provision that protects co-debtors. Unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a “consumer debt” from any individual who is liable along with the debtor. Consumer debts are those incurred by an individual primarily for a personal, family, or household purpose.

Individuals may use a Michigan Chapter 13 Bankruptcy proceeding to save their home from foreclosure. The automatic stay stops the foreclosure proceeding as soon as the individual files the Chapter 13 Bankruptcy petition. The individual may then bring the past-due payments current over a reasonable period of time. Nevertheless, the debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition. The debtor may also lose the home if he or she fails to make the regular mortgage payments that come due after the Chapter 13 Bankruptcy filing.