You might be facing debt problems, but you want to retain some of your most valued assets, and you have the income to afford lower monthly payments to pay off some of your debt. If you’re in Michigan and in need of a Chapter 13 bankruptcy attorney, let our lawyers at Andersen, Ellis & Shephard walk you through the details.
How does Chapter 13 work?
A Chapter 13 bankruptcy, also referred to as a “debt consolidation” plan, is ideal for individuals with a reliable source of income. Under Chapter 13 of the Bankruptcy Code, those with regular income can enter into a payment plan with creditors, whereby they agree to repay debts over three-year or five-year period. Most payments are reduced and consolidated in one monthly payment, which is usually MUCH LESS than what creditors are demanding! We can usually consolidate all debts at a payment that is affordable while protecting your wages and property.
A Chapter 13 bankruptcy plan allows you to keep your property as long as you remain in the plan and make your payments. Chapter 13 is ideal for helping debtors:
- Stop creditor harassment: A Chapter 13 bankruptcy proceeding provides debtors with the protection of the automatic stay, which means that creditors are prevented from making any further attempts to collect a debt, whether through letters, calls, collection agencies, lawsuits or legal filings for the duration of the bankruptcy proceedings.
- Stop compounding interest and late fees
- Stop mortgage foreclosures: If your mortgage is past due, a Chapter 13 can help catch it up and stop a foreclosure from occurring if the case is filed on time.
- Stop car repossessions: Car payments are usually included in the Chapter 13 plan and the car is paid off as part of the plan. Generally, no one can repossess or seize your car or other property once your Chapter 13 is filed.
- Stop wage garnishments: Your wages, earnings, bank accounts, and personal property are protected by the Chapter 13 “automatic stay” against creditors.
But to get this protection, you need to file for Chapter 13 bankruptcy. Interest and late fees are often waived under Chapter 13 plans. Many plans provide for a percentage payback if the client cannot afford to pay all debts in full. This means that Chapter 13 will often be the best payment plan for you.
How are Chapter 13 payments calculated?
In most Chapter 13 cases, the payment is based on your budget … your ability to pay. That is why it is important to work with a bankruptcy lawyer who will go over your income and your living expenses in detail with you.
Our office is unique in that we have a computer program which calculates your budget of income and expenses while you watch it on the computer monitor. We try to help you visualize your budget by going over it with you in our office. You can see the income and expenses broken down as we type it in, and see just where your money goes each month. This enables us to calculate how much you can afford to pay toward your debts very quickly, while you watch us.
You just need to know how much you make on average, and how much you spend on house payments, rent, utilities, insurance, groceries, gasoline, etc. House payments and rent are generally not included in the Chapter 13 plan unless you are behind.
What is at risk under Chapter 13?
Many people don’t know the difference between Chapter 7 and Chapter 13 bankruptcy. Chapter 13 is a better option for many who may risk losing assets in a Chapter 7 case. Where in Chapter 7 a trustee is appointed to look for non-exempt assets to sell in order to pay debts, the Chapter 13 trustee receives payments from the debtor and does not liquidate or seize control of any of the debtor’s assets. In this way, a person with assets that might be at risk in a Chapter 7 would select Chapter 13 in order to safeguard all assets. The stipulation would be to maintain the payments provided for by the plan.
If one waits too long, the property is lost for good. It is much easier for us to protect what you have than to try to get it back for you once it is seized by a creditor! Also, the longer one waits, the more interest and late charges are added to balances. Chapter 13 stops interest and late charges on most debts, so it is best to contact us quickly.
Chapter 13 is very useful in order to save a house from foreclosure. The plan will provide for the maintenance of the monthly payment on the house and then pay the lender a little extra each month so that the mortgage is caught up by the end of the plan. Once the plan is completed, the debtor will continue to pay the normal monthly mortgage. In the meantime, foreclosure is stopped while the default is cured over the life of the Chapter 13 plan.
Chapter 13 is very useful to stop repossession of cars, trucks, automobiles and other assets that are needed by the debtor. Instead of paying the usual payment and meeting the demands of the lender to catch up missed payments, the Chapter 13 plan can pay the loan off over a period of time at a reduced rate when combined with other debts that are owed. No one can take the debtor’s assets, property or vehicles while payments are maintained and the lender is protected by insurance on the property. The debtor is responsible for paying insurance.
Stopping interest, late fees and penalties:
For those who can afford to pay on their debts but are drowning in interest, late fees or penalties, Chapter 13 is useful for reducing payments on everything from credit card debts, signature loans, taxes and auto loans to medical bills, lawsuit claims and judgments.
Contact our experienced Chapter 13 bankruptcy attorneys to discuss your best course of action while filing for bankruptcy in Michigan. We have offices in Grand Rapids, Lansing, Muskegon, Big Rapids and Kalamazoo to assist you with your Chapter 13 needs.