What is a Chapter 13 Bankruptcy?
Chapter 13 bankruptcy in Michigan is a court authorized debt consolidation plan designed to provide reasonable repayment terms and court protection for your assets such as a home or vehicle. The purpose of the program is to:
Consolidate, prioritize and reduce your debts;
Provide a consistent repayment plan with favorable terms;
Improve your credit;
Provide court protection from your creditor.
Consider it simply as a “financial tool” that provides:
Optimal repayment terms (i.e. 0% Interest);
A way to consolidate, restructure and reduce your debt;
The time and breathing room to improve your credit and reach your financial goals in an orderly fashion.
When you file for bankruptcy in Michigan, the Chapter 13 plan simply requires that you make your “best effort” to pay back your debts over a 36 – 60 month time period. Whatever unsecured debts are not paid at the end of that time period are legally eliminated or discharged.
The chapter 13 bankruptcy definition is a plan that "enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years," according to the U.S. Courts.
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Benefits of a Chapter 13 Bankruptcy in Michigan
Keep your home
Filing a Michigan bankruptcy will legally stop a home foreclosure sale, as long as it is filed before the foreclosure sale occurs. If negotiations with your mortgage company do not resolve the problem, this reorganization may be your best or only option to save your home. While participating in a Chapter 13 Bankruptcy in Michigan, you still have the option to pursue a loan modification with your mortgage company. The program just provides the added court protection from foreclosure and allows you to have attorney staff assisting you in the process.
Remove a second mortgage or home equity loan
Chapter 13 banruptcy in michigan provides the only legal way to remove a secondary lien on your home. This process, called lien stripping, helps you to bring your home value more in line with current market conditions and reduces your overall monthly mortgage obligation.
Keep secured assets safe
You can be assured that while under the protection of this plan, your assets are safe. You can stop vehicle repossession before it happens or get the vehicle back before it is sold at auction. Once plan payments are complete, you’ll be caught up on secured debt and free of unsecured debt.
Lower your vehicle payments
Bankruptcy law allows you to lower your vehicle payments on loans to fit within your budget by modifying the contract to reduce the interest rate or extend the terms of the loan. If you have owned the vehicle for more than 910 days or 2 1/2 years, we can actually reduce the amount owed on the vehicle. This reduces the secured claim on the vehicle to the present market value and converts the balance of the loan contract to unsecured debt. This may allow you to discharge a portion of the debt at completion of the program.
Get 0% Interest Repayment Terms
Pay back your mortgage arrearages (missed payments) and all unsecured debt obligations at 0% interest with no continued late penalties. This goes into effect once the case is filed and extends through the life of the plan. It allows you additional time to pay back debts without penalty.
Reduce and eliminate Unsecured Debts (i.e. credit card bills, medical bills, judgments, etc) based on your budget
The Chapter 13 bankruptcy Michigan plan prioritizes catching up on your secured debt obligations and paying your monthly living expenses. Payment to unsecured creditors is deferred until you are caught up on your home, vehicle, taxes, etc. . Within your budget plan, we ensure that your mortgage or rent payment, vehicle payment, necessary living expenses, etc. are all taken care of before we schedule any payments to your unsecured creditors. You are only required to pay your “best efforts”. Whatever balances remain at the completion of the program are legally eliminated or discharged. You are free of all unsecured debts at the end of the 36-60 month program.
Improve your credit
Chapter 13 debt consolidation will improve your credit over the life of the program by lowering your debts (thus improving your debt-to-income ratio) and re-establishing a regular payment record with your creditors. These two factors account for 65% of your credit score according to FICO.
Gain added freedom and flexibility
This plan does not lock you in. You have the ability to refinance your home or sell your home and pay off your case early. If your income changes, we can always adjust your plan payments to reflect your new circumstances.
Stop garnishments, harassing calls and utility shut-offs
All garnishment and creditor calls will be stopped at the time of filing. We can stop a utility shut-off before it happens and/or restore services after a shut-off has occurred.
Working with an attorney will help develop a repayment plan taking into consideration your income and all of your debts. They can prioritize certain debts (i.e. getting caught up on a first mortgage) that will get paid through the plan before other bills (i.e. credit cards). Here are the steps in the bankruptcy process:
- File a petition for Chapter 13 bankruptcy and receive an automatic stay on your debt. It now becomes illegal for debt collectors to attemt to collect money from you.
- A Chapter 13 trustee will be appointed to your case to oversee your files and communicate with all parties.
- The courts will send their bankruptcy notice and creditors can file any objections.
- Submit a tax return.
- Begin making payments on your repayment plan.
- Attend a creditor's meeting.
- You may modify your plan and then hold a confirmation hearing.
- Creditors file proof of claims.
- The Chapter 13 trustee will send periodic statements.
- Submit your annual income and expense statements each year.
- File proof of financial management course completion.
- Court grants discharge.
Your Next Steps
If you are considering filing for Chapter 13 bankruptcy in Michigan, your next steps are to find and attorney you can partner with and receive a free consultation.
Acclaim Legal Services was established to do one thing: help our clients find lasting debt resolution and restored credit.
Calling us may be your first step towards finding financial freedom and peace of mind. At the free consultation, one of our experienced Chapter 13 lawyers will review your current credit, outstanding debt obligations and future financial goals to provide you with an in-depth analysis and recommended next steps.
We are here to answer your questions and provide qualified legal advice. Don’t delay getting your credit and life back on track – call us today at 866-261-8282 or schedule a free consultation.