As many as 80 percent of Americans are caught amid debt, including credit cards, personal loans, mortgages, and student loans. Although a vast majority of individuals are dealing with debt, there’s still shame and misinformation associated with filing bankruptcy. However, the need for bankruptcy as a solution to overwhelming debt goes back to our founding fathers, who included a provision in the U.S. Constitution for Congress to enact laws regarding bankruptcy. That provision gave way to the Title 11 Bankruptcy Code, which now comprises six chapters to address various bankruptcy needs.
We’re discussing Chapter 13 bankruptcy in Michigan, the wage earner’s plan for overcoming debt.
Is Michigan’s Chapter 13 bankruptcy right for you?
If you’re employed and earning regular wages, Chapter 13 bankruptcy may be right for you. When you file, you’ll work with the bankruptcy court to repay your existing debts in three to five years, depending on your yearly income.
The debtor submits a plan for court approval to make biweekly or monthly payments to their creditors. The amount of repayment under Chapter 13 is often less than the full repayment of the borrowed amount.
What are the advantages of Chapter 13 versus Chapter 7?
If you can qualify for Chapter 13, it offers several advantages over total liquidation under Chapter 7. You’re able to keep your home and prevent foreclosure, even if proceedings have already begun.
You can also reschedule any other secured debts besides your mortgage, spreading them out over the term of your Chapter 13, which may lower the monthly payment.
With Chapter 13, you no longer have direct contact with creditors. Instead, you make scheduled payments to a trustee, who then distributes the funds to the creditors.
What types of claims are there in Chapter 13?
All debt owned by someone filing Chapter 13 is qualified in one of three ways:
Priority: taxes or the cost of filing bankruptcy itself.
Secured: debt with collateral of value, such as a mortgage or car loan.
Unsecured: debt in which the creditor has no material claim to debtor property for the loan.
Under Chapter 13, borrowers must pay priority debt first and in totality. Borrowers must pay secured debts to the property value if the debtor wishes to keep the collateral. Unsecured debts are likely not paid off in total. However, filers must devote disposable income to paying the debt for a predetermined amount of time.
What documents do I need for filing Chapter 13 bankruptcy in Michigan?
To make the most out of your time with a bankruptcy attorney, gather the paperwork ahead of time. All chapters of bankruptcy require the same basic information, but the more detailed and current paperwork you can provide, the better.
Tax returns: bring tax returns for the past two years.
Income documentation: as a wage earner, you must bring six months of pay stubs, plus your last two W-2s.
Bank statements: bring six months of bank statements to show your profit/loss and any additional income.
Mortgage: if you own real estate, bring a copy of your recorded mortgage.
These are just a few of the required documents you’ll need. See our complete list of what you’ll need to file Chapter 13 bankruptcy in Michigan, including what to do if you’re divorced, own cars, or have life insurance policies.
Gathering documents to file may feel overwhelming, but working with a bankruptcy attorney can help get you to a fresh start faster.
If you need help filing Chapter 13 bankruptcy in Michigan, contact James L. Gutting, Attorney-at-Law.
Jame L. Gutting is an experienced Michigan bankruptcy attorney offering individuals struggling with their debt burden a fresh start. We can help if you’re struggling to make the minimum payments on your debts.
Filing for Chapter 13 bankruptcy in Michigan is less stressful when you have an experienced, confident attorney working with you. Contact James L. Gutting, Attorney-at-Law to learn more.