Chapter 13 Bankruptcy Explained

What do you think when you hear the word bankruptcy? Most people view this as a last resort. They imagine losing property or damaging their credit beyond repair. Yet, bankruptcy can be a way to reorganize and restructure debt so you can move forward without the burden of past financial obligations.

There is a wide array of unique financial tools available under a Chapter 13 bankruptcy. This customized debt consolidation plan could be your best option for legal protection and full financial recovery. Set up your free consultation with Acclaim Legal Services for help.

What Is a Chapter 13 Bankruptcy?

If you're tired of carrying the weight of financial stress, you need a manageable pathway toward debt relief. Chapter 13 bankruptcy in Michigan is a court-authorized debt reorganization and repayment program. Think of it as a financial tool that provides unique benefits:

• Protects you from creditors
• Allows you to keep your assets
• Restructures and prioritizes secured debt
• Creates a repayment program that makes sense with your budget
• Gives you time to improve your credit
• Provides optimized repayment terms, such as 0% interest

Your Chapter 13 program will be spread over a 36- to 60-month repayment period. During that time, the court requires that you make your "best effort” to settle debts. Once your plan is complete, any unsecured debts that are not paid are legally forgiven or eliminated.

How Filing for Chapter 13 Can Benefit You

While there are other debt resolution options out there, few offer the protections and unique benefits of Chapter 13.

Organize and Prioritize Your Debts Effectively

A Chapter 13 bankruptcy plan establishes a hierarchy for debt repayment. Simply put, your plan will prioritize certain types of debt over others to ensure the highest-priority items are addressed and paid first. Take a look at how debt is ranked under Chapter 13:

• Priority Debts: These are debts that must be paid in full under your Chapter 13 repayment program, including child support, alimony, and certain taxes such as income or property taxes.
• Secured Debts: Next in line are debts tied to a specific property, such as your home or car. That's why a lender can take possession of these assets if the outstanding debt is not repaid.
• Unsecured Debts: Finally, unsecured debts are paid with any remaining funds in your plan. Unsecured means that these debts are not backed by collateral.

Save Your Home

If you're worried about losing your home, Chapter 13 may be your best or only option to avoid foreclosure. We can work with you to protect the home you've worked so hard for.

Even after filing for Chapter 13, you can still work with your lender to modify your mortgage — or refinance the loan with a new lender if better loan rates are available.

If you are current on your mortgage but have too much equity to qualify for Chapter 7 bankruptcy, filing for Chapter 13 may be your best option to protect your home — while reducing or potentially eliminating a portion of your debts.

Potentially Remove a Second Mortgage or Lien

When you have a second mortgage or a creditor puts a lien on your home, you may be stressed, wondering how you'll ever pay off these debt obligations. Chapter 13 is the only legal way to potentially remove that underlying debt.

This process, called lien stripping, helps you bring your home value more in line with current market conditions and reduces your monthly mortgage obligation.

If you're underwater on your loan and owe more on your mortgage than your home is currently worth, ask one of our experienced attorneys if you qualify for a lien strip.

Safeguard Secured Assets

While protected by the Chapter 13 plan, your assets will remain safe. That means you won't have to worry about vehicle repossession or creditors seizing your personal property during your Chapter 13 program. Once plan payments are complete, you’ll be caught up on secured debt and free of all unsecured debt.

Lower Your Vehicle Payments

With Chapter 13, you can reduce your car payments to be more budget-friendly — modifying the contract to extend loan terms or lower the interest rate.

If you've invested two and a half years or 910 days of payments, we may even be able to reduce the amount you owe on the vehicle. By decreasing the secured claim on your vehicle to the present market value, the balance of the loan contract converts to unsecured debt. That means you can possibly discharge a portion of the debt once your repayment program ends.

Get 0% Interest Repayment Terms

If you've missed payments on your mortgage loan, credit cards, or medical bills, a Chapter 13 can help. The repayment plan allows you to pay back overdue mortgage debt and all unsecured debt obligations without interest or late penalties during the repayment plan.

This goes into effect once the case is filed and extends through the life of the plan, giving you extra time to pay back debts without penalties.

Reduce and Eliminate Unsecured Debts Based on Your Income

Paying back debt should be manageable and work within your budget constraints. The Chapter 13 bankruptcy plan prioritizes catching up on your secured debt obligations while leaving you enough to pay for living expenses. That means your rent or mortgage payment, vehicle payment, necessary living expenses, and other priority debts are the focus before you have to schedule any payments to your unsecured creditors.

Credit card bills, medical bills, and judgments are all deferred until you're caught up on the highest-priority items. You're only required to try your best to pay back unsecured creditors. Whatever balances remain at the end of the program are legally eliminated or discharged. You'll be free of all unsecured debts at the end of your 36- to 60-month repayment plan.

Improve Your Credit

There's a lot of misinformation about Chapter 13 damaging your credit. In reality, Chapter 13 will improve your credit over the life of the program. Lowering your debts improves your debt-to-income ratio. The program also re-establishes a regular payment schedule with your creditors. These two factors alone account for over half of your credit rating.

Enjoy Freedom and Flexibility

With Chapter 13, you're not locked into an uncomfortable financial arrangement that stifles your freedom. You can refinance or sell your home, consolidate your debts into a single payment plan, and even pay off your case early. If your financial situation changes, we will work to adjust your payment plan to reflect changes in income. You can also convert your case to a Chapter 7 bankruptcy at any point during the process, provided you qualify.

Stop Creditor Actions

Whether you're worried that your utilities will be shut off or you're tired of harassing phone calls, Chapter 13 puts a stop to that at the time of filing. We can cease:

• All garnishments
• Creditor actions
• Harassing creditor calls
• Utility shut-offs

We can also restore services after a shut-off has occurred.

Chapter 13 Bankruptcy Filing Process

The Chapter 13 bankruptcy process can be complicated, but you don't have to navigate it alone. The experienced attorneys at Acclaim Legal Services will support your debt relief journey, helping you develop an optimized repayment plan that considers your unique financial picture.

Here are the broad steps in the bankruptcy process.

1. Consultation

We encourage you to schedule a consultation with one of our experienced bankruptcy attorneys who can evaluate your eligibility to file for Chapter 13, including your:

• Income
• Debt limits

We offer free, confidential consultations and a comprehensive analysis of your finances so that we can recommend next steps that make sense for your situation before making any decisions on a course of action.

2. Retain Your Attorney

The best Chapter 13 bankruptcy attorney will represent your interests and focus on providing caring, personalized services.

3. Pre-Filing Credit Counseling

Before filing your bankruptcy petition, you'll attend pre-filing credit counseling. This is not a physical, in-person course. Rather, you can complete this requirement at your convenience, either online or over the phone. Our team will walk you through the pre-filing counseling process to keep things moving forward.

4. Gather Necessary Documents

When you come for your free initial consultation, we'll provide a full checklist of the documents needed to file, such as:

• Proof of income, such as pay stubs or tax returns
• List of all debts, including credit cards, medical bills, and mortgage
• Record of assets, such as property or bank accounts
• Inventory of your monthly expenses

We'll also pull a tri-merge credit report to ensure we have a comprehensive list of creditors based on your information. This report also provides you with a projected net credit score effect of your 12-month post-bankruptcy credit score to determine the overall impact your credit score has on your financial well-being. For most of our clients, this gives you a glimpse of the projected increase to your credit score.

5. File for Chapter 13 Bankruptcy

When you feel comfortable moving forward, we'll petition for Chapter 13 bankruptcy. Once filed, it becomes illegal for creditors to attempt to collect money from you.

6. Judge and Trustee Assignment

Next, you'll be assigned a bankruptcy judge and trustee to oversee your case. A Chapter 13 trustee provides oversight and acts as a go-between for all parties — you, your creditors, and the court.

7. Meet Your Dedicated Legal Team

Based on the judge and trustee selection, we'll assign a committed attorney and paralegal team specializing in that judge’s specific court docket. This team understands the judge’s prior ruling, plan requirements, and the trustee’s usual issues or objections, giving them unique insight into your case.

Over our more than 20 years in practice, we've perfected this system. We're an established and respected Chapter 13 law firm, so the judges and trustees know what to expect from us. They know we work tirelessly to represent our clients — providing you with a significant advantage.

8. Repayment Plan Proposal

We'll work with you to tailor a customized repayment plan to pay off your debts over three to five years — outlining how you'll repay secured and unsecured creditors. The bankruptcy court must approve the plan, and the trustee will review it to make sure it meets the requirements.

9. The 341 Meeting of Creditors

Shortly after filing, you'll attend the 341 meeting of creditors with your attorney, where you'll meet with the bankruptcy trustee and possibly creditors. The trustee will review your financial information and inquire about your assets, debts, and proposed repayment plan. While creditors can also attend and ask questions, they usually do not.

10. Pre-Confirmation Requirements

At this point, everyone involved must complete the requirements of the pre-confirmation process. The courts will send their bankruptcy notice, and creditors can file any objections. Creditor and trustee objections are very typical — and it's our job to resolve them and put your mind at ease

Other pre-confirmation steps may include:

• Submitting a tax return and other required documents
• Making payments on your repayment plan within 30 days of your case filing
• Arranging modifications to your Chapter 13 plan before its confirmation, depending on the circumstances

11. Final Confirmation Hearing

Once all steps are complete, you can look forward to the final confirmation hearing. With our firm's case preparation and experience, it is often not necessary for you to participate in this hearing. Once the judge consents to the proposed Chapter 13 repayment plan, your case will be officially approved with an Order Confirming Plan.

12. Creditors Proof of Claims

Creditors have to file proof of claims within six months to establish what you owe. But don't worry — we can dispute debts or claimed amounts if needed.

If a creditor fails to file the required form within the six-month deadline, the debt will be legally eliminated with a court discharge at the end of the Chapter 13 plan. That means you won't have to pay it.

13. Post Confirmation Process

After your final confirmation hearing, here's what you can expect:

• The Chapter 13 trustee will send periodic statements.
• You must submit your annual tax returns and any other required documents.
• We will conduct periodic reviews to ensure your case is running smoothly.

We know you're bound to have questions or concerns from time to time — and we are always available to help you resolve issues. If your financial situation changes or you need a helping hand, we can:

• Adjust your payments if needed
• Help you refinance a mortgage loan
• Excuse missed payments if you have unexpected expenses
• Assist you in numerous other ways

14. Financial Management Course

The second step of credit counseling comes at the end of the Chapter 13 process. You'll be required to complete and file proof of financial management course completion, which can also be completed at your convenience, either online or over the phone.

15. Court Grants Discharge

After all your hard work and perseverance, we look forward to helping you complete your Chapter 13 repayment program. Any remaining balance on unsecured debts will be legally discharged and eliminated on that final day.

Why Trust the Bankruptcy Specialists at Acclaim Legal Services

The attorneys and legal specialists at Acclaim Legal Services have one focus — helping you find lasting debt resolution. Since our doors opened in 2003, we've specialized in bankruptcy cases, learning the ins and outs of Chapter 13 to share our knowledge with you.

We've witnessed firsthand how this powerful financial tool can help you break the cycle of debt. We're proud to share our in-depth understanding of legal principles and Michigan court procedures to help you claim financial freedom. With our multiple locations, we can serve Dearborn, Wayne, Washtenaw, Oakland, Ingham, Macomb, Genesee, and Southfield counties.

Schedule Your Consultation With a Chapter 13 Bankruptcy Expert

Say goodbye to the stress and frustration of debt. If you're ready to get your credit back on track and relieve financial strain, reach out to Acclaim Legal Services. Call us at 866-965-2857 or contact us online to schedule a free consultation with one of our experienced Chapter 13 lawyers. We're available Monday through Friday at regular business hours and on Saturday from 9 a.m. to 12 p.m. After hours, you can SMS text or call 248-840-3368.