Chapter 13 bankruptcy is often a good option for people who have debt that they cannot manage on their own, but who do not qualify for Chapter 7 bankruptcy because their income is too high. Even if you do meet the financial criteria to file Chapter 7, there are other reasons you might want to pursue a Chapter 13 instead. For instance, you might have certain assets you want to keep that might be vulnerable in a Chapter 7 bankruptcy.

Chapter 13 offers a way to get caught up on debt while keeping your home and vehicle. Filing a Chapter 13 case will stop foreclosure proceedings on your home and give you a chance to catch up on overdue mortgage payments. You may also be able to “reschedule” other secured debts, like a car loan, and extend payments on those debts over the life of your Chapter 13 plan.

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is also called “wage earner’s” or “reorganization” bankruptcy. Unlike Chapter 7, which resolves in a matter of months, a Chapter 13 case goes on for three to five years. You will have to go through credit counseling with a court-approved agency and get a certificate of completion before you are able to file your bankruptcy petition. You will also have to provide complete financial information on the documents that make up your Chapter 13 bankruptcy petition. This information includes:

• All of your creditors, how much you owe them, and the nature of the debt
• How much income you have, the source of your income, and how often you are paid
• All of the property you own
• A list of all your monthly living expenses, including food, clothing, housing, utilities, cell phone bill, transportation costs, regular medical expenses, taxes, and more.

This information allows your attorney to create a Chapter 13 repayment plan, which the bankruptcy court must approve (confirm). You will repay a percentage of your debt over the course of the plan. Plan payments are made to the bankruptcy trustee overseeing your case. If you successfully complete the plan, you will receive a discharge of the remaining debt covered by the plan, with some limited exceptions. To learn more about Chapter 13 bankruptcy in Michigan, check out our Chapter 13 Bankruptcy Resources.

Advantages of Chapter 13 Bankruptcy

Save Your Home From Foreclosure

One of the biggest advantages of a Chapter 13 bankruptcy is that so long as you file prior to the date of a foreclosure sale, you may be able to keep your home and pay past-due mortgage debt over the three to five-year life of your Chapter 13 plan. However, you must be able to make regular monthly mortgage payments in full going forward; the bankruptcy only stretches out your payment of past-due debt, also called “arrearages.”

Remove Second and Subsequent Mortgages

If you have a second mortgage on your home and cannot afford to pay it while you are in Chapter 13, a process called “lien stripping” may be able to help. If your home is worth less than the amount you owe on your first mortgage when you file your Chapter 13 bankruptcy in Michigan, the court may approve the lien strip. You will not have to make payments on the second mortgage or lien during your bankruptcy, and that debt will be eliminated if you successfully complete your plan and receive a discharge.

Pay What You Can Afford Toward Your Debt

In Chapter 13, you make a monthly payment to your bankruptcy trustee to pay down your debt. This payment is based on a budget your attorney will help create based on your income and necessary monthly expenses. The amount of your income left over after expenses is your discretionary income. This may be only a small percentage of what you owe. If you keep making the required payments until your plan is complete, your debt will be discharged even though you were only able to afford to pay part of it back.

Relief from Creditor Calls and Harassment

The moment you file your Chapter 13 bankruptcy in MIchigan, your creditors are subject to the “automatic stay.” This means that they cannot contact you regarding your debt or take any measures to repossess property that secures debt you owe to them.

Chapter 13 Comes Off Your Credit Report Sooner

While a Chapter 7 bankruptcy remains on your credit report for 10 years, a Chapter 13 bankruptcy comes off your credit report after 7 years.

Work with an Experienced Detroit Chapter 13 Bankruptcy Attorney

Attorney John Steinberger has decades of legal experience and has filed over 10,000 bankruptcies in his career. Many of these were Chapter 13 bankruptcies that allowed wage earners to get out from underneath crushing debt while keeping their homes and continuing to make payments.

If you are worried about how to resolve your debt, you do not need to figure it out alone. Contact John A. Steinberger & Associates, P.C. today to discuss your options and begin moving toward a brighter financial future.