Michigan residents and others who file for Chapter 13 bankruptcy protection may be able to consolidate or reorganize debts without losing property. However, they still have many obligations to their creditors even if their bankruptcy petitions are approved. For instance, they must submit a payment plan with their petition and stick to it for either three or five years. The length of a repayment plan depends on how an individual’s income compares to the median in the state.

Those who file for a reorganization bankruptcy must pay priority debts such as past-due child support payments or back taxes owed in full. Furthermore, debtors must stay current on debts such as mortgages, car loans or others that are secured by collateral. Finally, a plan must account for attorney fees as well as the fee charged by the trustee overseeing the case.

The first plan payment must generally be made within 30 days of filing for Chapter 13 protection. If the plan is approved, payments will be forwarded from the trustee to a person’s creditors. If the plan is denied, a majority of the funds will be returned to the debtor. After a plan is approved, debtors cannot accrue new debt without first obtaining approval from the trustee as well as the judge who is overseeing the case.

A person who files for Chapter 13 bankruptcy may be able to put an end to creditor phone calls and letters. It may also be possible to avoid a repossession or a foreclosure during the repayment period. An attorney may help a debtor pursue legal action against a creditor that violates an automatic stay. Legal counsel may also provide guidance as it relates to completing the credit counseling requirements that must be fulfilled in a Chapter 13 bankruptcy proceeding.