Chapter 13 Bankruptcy Services
Chapter 13 bankruptcy is reorganization or repayment of some or all of your debt. There are several reasons people file Chapter 13 bankruptcy. Typically, people file Chapter 13 because they want to stop a foreclosure and save their home or stop a vehicle repossession and save their car. To stop a Michigan foreclosure, you MUST file Chapter 13 BEFORE the sheriff's sale. You should NOT wait until the last day since it may be too late. To stop foreclosure and save your house, you must have the ability to pay your mortgage. Currently, bankruptcy does NOT change your monthly mortgage payment, your interest rate or the terms of your mortgage. Rather, it allows you to take all the payments you are behind and spread them over a 3 to 5 year period. You are therefore required to pay your regular mortgage payment and something towards the total amount for which you are behind. This is called Repayment of Debt.
The amount of the monthly payment and the length of the repayment plan are based upon the following factors:
- Monthly income of the person
- Monthly expenses of the person
- Amount and nature of the debt
The most common uses of Chapter 13 involve:
- Repayment of mortgage arrears (back amounts owed on your home)
- Restructuring of auto loans to save a vehicle
People also file Chapter 13 bankruptcy if they have more assets than they can protect since Chapter 13 gives them the opportunity to keep those assets without losing them as long as they repay their creditors an amount equal to what they cannot protect. Finally, if your income is considerably higher than your expenses, you will most likely have to file Chapter 13 and repay some portion of your debt depending on your financial situation.
Michigan Bankruptcy Attorney Daniela Dimovski will create a Chapter 13 plan and propose it to the Court, your Trustee and your creditors.
The Trustee is the person the Court has assigned to collect the payments you send in so that they can pay your creditors. In your Chapter 13 plan, you will make a payment to the Trustee, either weekly, biweekly, semi monthly or monthly depending on how you get paid. Once your case is confirmed (or approved), the Trustee will pay your creditors at the beginning of each month. If you don't make your payments to the Trustee, then they cannot pay your creditors. FAILURE TO PAY YOUR TRUSTEE WILL LEAD TO THE DISMISSAL OF YOUR CASE, WHICH MEANS YOU WILL LOSE Chapter 13 BANKRUPTCY PROTECTION!!!!
A Chapter 13 bankruptcy case lasts from 3 to 5 years with the length of time being determined by your income. If you are below the median or average income, you qualify for a 3 year plan, meaning you will be paying a percentage of your debt for 36 months. However, we can extend it to a 5 year plan if necessary to make the monthly payment more affordable. If your income is above the median or average income, you MUST be in a 5 year plan. This means you will be paying more back since you will pay a percentage for 60 months (versus paying that amount for 3 years).
There are typically 2 kinds of debt we deal with in a Chapter 13 bankruptcy plan; secured debts and unsecured debts. Secured debts are debts that have a lien attached to them, like a house or a car. These debts usually are repaid in full. Unsecured debts are credit cards, medical bills, deficiencies, personal loans, etc. These debts can be paid anywhere from 0% to 100% depending on how much income you have left at the end of the month after paying reasonable and necessary expenses.