Michigan Chapter 13 Bankruptcy

There are a number of options to consider under the US Bankruptcy Code when it comes to dealing with debt and filing a petition. Chapter 13 Bankruptcy is a more complex form of petitioning and the main difference between it and Chapter 7 is that the former is a “reorganization” or “restructuring” of debt, whereas the latter is straight “liquidation”.
So what are the main characteristics of the Chapter 13 Bankruptcy under Michigan Bankruptcy Laws?
• Chapter 13 Bankruptcy is available as an option only for individuals
• It is an opportunity for them to start afresh and pay-off significant portions of their outstanding debts
• The debtor commits to repaying all or part of what he owns to his creditors under a 3-5 year repayment plan which has to be approved by the Court.
• The individual must be earning a regular income and have sufficient disposable income to apply for Chapter 13 Bankruptcy
• Most commonly people use Chapter 13 when they are late with mortgage, tax or car payments or want stop their tax debt accruing interest.
Typically, debtors who apply under Chapter 13 have valuable secured assets, such as real estate or a car, which they want to protect as the equity in these assets is higher than the protected amount under Michigan bankruptcy exemptions.
How does it work?
The first step is to develop a repayment plan which is the key to a successful Chapter 13 petition as it describes in detail how much each of your creditors will get paid. The next step is to get the plan approved by the court. You then have 30 days after filing the case to make your first repayment.

It is important to know that there are a number of factors at play for determining the amount of the repayments, with the debtor’s disposable income being the main criteria. There is a Michigan Means Test which is usually used. Bear in mind that in order to qualify for a Chapter 13 Bankruptcy the total amount to be paid under the plan must be at least as much as what creditors would have received under a Chapter 7 Bankruptcy. When it comes to exemptions, in Michigan you can choose between the federal statutes or Michigan exemptions.
In general Chapter 13 is more suitable if you have valuable property not covered by the

Michigan bankruptcy exemptions and you would like to protect it. Like with other cases of bankruptcy filing, it is always best to call Firebaugh & Andrews for your free evaluation 734-722-2229  advice before proceeding to ensure that you are acting in your best interest. Firms that specialize in bankruptcy law have a wealth of experience and knowledge that is well worth tapping into when it comes to making important financial decisions.