Chapter 13 Bankruptcy Attorney in Ypsilanti, Michigan

So far in 2021 through August, American Bankruptcy Institute (ABI) statistics show that there have been 11,461 bankruptcy filings in Michigan, with 4,297 of them being Chapter 13 filings, or roughly 20 percent of the total.

What is a Chapter 13 filing? The federal bankruptcy code is broken down into various chapters, and Chapter 13 represents a reorganization and repayment plan. In this plan, you often get to keep your home, car, and other possessions.

If debt is overwhelming you in Ypsilanti, Michigan, or nearby in Belleville, Ann Arbor, Kalamazoo, or Portage, contact The Law Offices of John R. Bailey. Attorney John R. Bailey can meet with you, assess your situation, and advise you of your best option going forward. If that option is a Chapter 13 filing, he will help you every step of the way—from filing the paperwork to securing a debt-free fresh start.

What Chapter 13 Entails

Chapter 13 of the bankruptcy code is designed for those with a steady income who wish to preserve their assets while making good on their debts. The signature element is a repayment plan that the debtor proposes and submits along with the bankruptcy filing.

To create the plan, the debtor must calculate disposable income after meeting the basic needs of life—shelter, food, transportation, health insurance, and the like. The repayment plan will propose using that disposable income amount to satisfy credit obligations.

The repayment plan will consolidate all loan obligations into one monthly payment. As for the debts, they can usually be reduced to lower the total of consolidated obligations, but the plan must be submitted to a meeting of creditors for approval. If a creditor feels they are being shortchanged, they can object, and the debtor may have to reconfigure the plan.

Unsecured vs. Secured Debts

Generally, the repayment plan will cover only unsecured debts. Vehicles, homes, and property are secured debts, meaning you pledged them to the creditor in case you defaulted on your loan. If you are behind on a car or house payment, often you can consolidate those arrears amounts into the repayment plan, but you must still meet the obligated monthly loan amounts on your secured possessions.

Note, however, that not all debts can be discharged. These include past-due taxes, most student loans, and child and spousal support payments. Those have to continue to be paid in full. In fact, under a Chapter 13 filing, you must show that your taxes are all current.

Time Limits for Repayment

The repayment plan must be paid off within three to five years, after which you will be discharged from bankruptcy. In the interim, you cannot take on new debt without approval of the bankruptcy court, so your financial life will essentially be put on hold during the repayment period.

Fortunately, you will be assigned a trustee who will handle the creditors once your plan is approved. You simply send that person the approved monthly payment, and the trustee will handle paying the creditors.

Qualifying for Chapter 13

There are established debt limits to qualify for a Chapter 13 filing. The debt limits will be reconsidered and revised on April 1, 2022, but as of right now, they stand at:

• $419,275 in unsecured debts

• $1,257,850 in secured debts

So, if you own a home worth $1.5 million and have $500,000 in unsecured debt, you cannot use Chapter 13. Chapter 11 would be your option.

Qualifying for bankruptcy protection also requires the filing party to undergo a mandatory and approved credit counseling course. Additionally, you must have enough disposable income that you can reasonably repay your obligations. If you have no income, or it is too low, your only option may be liquidation bankruptcy under Chapter 7.

Note that businesses cannot use Chapter 13. It is only for individuals and families.