Filing a Chapter 13 Bankruptcy in Michigan: Basic Steps

Are you drowning in debt and do not know of the debt relief options that can work for you? Is the prospect of losing your home or your car scaring you? Fret not. Filing bankruptcy is one option which can help you get out of debt.  

If you have personal property that you wish to keep, a Chapter 13 bankruptcy petition may be the one for your. Filing Chapter 13 bankruptcy is a complex and overwhelming process. The full basic steps of filing bankruptcy itself can be confusing. However, making the wrong choice of petition to file can have long-lasting consequences that may also be costly.

Hammerschmidt Stickradt & Associates is a Royal Oak bankruptcy law firm that helps people file for Chapter 13, Chapter 7, and other types of bankruptcy. Our competent bankruptcy lawyers also serve clients in Wyandotte, and throughout Michigan.  

Talk to one of our reliable bankruptcy attorneys for a free consultation.

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How Michigan Bankruptcy Works

The US Bankruptcy Code governs bankruptcy, a federal statute. To be excluded from bankruptcy, the property must be owned by the state. However, Michigan will allow you to utilize the federal exemption system. For all exemptions, you must choose one.

Exempt property is not subject to creditor claims and is not lost in bankruptcy proceedings. Firstly, there are two forms of bankruptcy in Michigan:

Chapter 7 Bankruptcy. 

If your revenue is below the state’s median, you may qualify for this kind of liquidation bankruptcy. To repay your creditors, you must turn over all non-exempt assets to a trustee. State exemptions frequently safeguard assets in Chapter 7 bankruptcy, which frequently results in debt relief.

Bankruptcy Chapter 13 

You may restructure your debts if you need more time to pay them. In most cases, you may pay off part of your debt by following a court-approved repayment plan. In most cases, homeowners may maintain their houses after filing Chapter 13.

The bankruptcy court will grant an automatic stay when you petition for any form of bankruptcy. A stay inhibits creditors’ collection efforts, including court lawsuits and foreclosures. As such, you have some breathing space with your creditors when you file for bankruptcy.

Choosing the Correct Chapter of Bankruptcy in Michigan

Before you file bankruptcy in Michigan, it is important to determine whether Chapter 7 or Chapter 13 bankruptcy is right for you. Your choice of bankruptcy chapter will affect your ability to discharge debts and retain the property. In order to make an informed decision, you should contact an experienced bankruptcy attorney before filing.

Basic Steps for Filing for Bankruptcy Chapter 13 in Michigan

Step 1: Gather your papers.

Get copies of your credit report from the credit bureaus. You may acquire a free credit report once a year.

Find out how much you owe and who your creditors are before filling out any documents. Not all debts will be reported on your credit report. You must identify all debts on your bankruptcy paperwork, whether or not they appear on your credit reports (medical bills, tax debts, fees, and fines). 

You will also need the following documents:

  • Four years of tax returns
  • Paystubs or other income proof for the last six months
  • 3–6 month bank statements
  • Recent mortgage and property tax bills
  • Residential lease agreement
  • Last year’s retirement or brokerage statements
  • Real estate valuations or appraisals
  • Newest vehicle loan bill (s)
  • Other records of your assets, obligations, and income.

These records can help you gain a fuller view of your finances. Their availability will make filling out bankruptcy documents considerably simpler.

Step 2. Examine your debts.

It’s time to review your debt list! Indicate the kind of debt next to each. Is it a charge? Is it a bill? Payday loans?

Once you’ve identified your debt category, you’ll need to determine if your debts are secured or unsecured. 

The next phase in debt analysis is determining which obligations are a priority and which are not. Priority debts include child support, domestic support, and certain taxes. Whether your obligations are secured, unsecured, priority, or non-priority will affect your monthly Chapter 13 plan payment amount and distribution order.

Step 3: List your property.

Please make a list of all your possessions and their values. Remember to take inventory of your assets, so you can determine how much of them may be exempted from bankruptcy. While Chapter 13 bankruptcy enables you to retain all of your assets, it also demands that you pay certain creditors the value of your unprotected assets.

That is, you may expect to pay the same amount as if you had filed a Chapter 7 lawsuit.

Step 4: Make a budget and assess your revenue.

Unemployed people may pursue Chapter 13 bankruptcy. However, you must have revenue from a source other than your job. You may file a Chapter 13 if you receive government support, financial help from friends or family, or monthly pension payments.

If you develop a budget and realize you don’t have enough money to afford your monthly living costs plus your Chapter 13 plan payments, you can’t continue. To go ahead with your case, you’ll need to show the bankruptcy courts that you have a viable strategy.

Step 5: Start a credit counseling program.

Before filing Chapter 13 bankruptcy, you must complete a credit counseling course approved by the Department of Justice. The training may be done online or by phone in about an hour. The cost varies from $10 to $50. This charge may be waived if your family income is below 150% of the federal poverty threshold.

If you complete the course, you will get a certificate. Keep a copy with your bankruptcy papers.

Step 6. Fill out your bankruptcy documents.

This is the phase that takes the longest. You need to state your income, expenses, assets, and debts in your bankruptcy forms. Your Chapter 13 petition has 23 forms and around 70 pages. You must provide all financial data and provide the court with a complete financial picture. Filling out Chapter 13 bankruptcy filings includes designing your Chapter 13 repayment plan.

Step 7: Chapter 13 Bankruptcy Petition Filing and Fee

After filling out and reviewing your bankruptcy documents, print them out, sign the signature pages, and present them to court. Don’t forget to provide your credit counseling certificate with your bankruptcy paperwork.

A Chapter 13 lawsuit costs $313 to file. When you submit your paperwork, you must pay the whole cost immediately to the court. Unlike Chapter 7, there is no cost waiver option for Chapter 13. Print out the precise number of copies required by your local bankruptcy court. Contact your local bankruptcy court to find out how many copies you need to bring.

Step 8. Email your trustee’s documentation.

You must cooperate with reasonable document demands from your trustee, who is in charge of your case. Your trustee will ask for financial papers, including tax returns, pay stubs, and bank statements, before your creditor’s meeting.

Your trustee will use these papers to compare and verify your bankruptcy paperwork. Your case will be dismissed if you do not provide your trustee with these papers. As such, your debts won’t be discharged.

Step 9. Attend your 341 creditors meeting and confirmation hearing.

A month after filing, you’ll meet with your Chapter 13 trustee. Don’t worry; you won’t be meeting the allocated judge today! Your creditors are entitled to attend your 341 meetings, but they seldom do.

You’ll need to prove your identification and give supporting documentation to your trustee. Your trustee will evaluate your supporting paperwork and use your testimony to ensure your bankruptcy filings are appropriately filled out, and your recommended plan is viable.

Your next appearance is during your confirmation hearing. On this day, you WILL have to face a court judge. The court will either affirm (accept) your Chapter 13 plan or deny it. If neither your trustee nor your creditors object, your case will be confirmed.

Step 10: Pay your Chapter 13 plan on time.

Woohoo! It’s over! You got your Chapter 13 plan approved! Now you must keep paying your monthly plan for 3 to 5 years until your case is closed and your debts are discharged.

The first payment is required 30 days after filing. Remember that until your case is verified, your monthly plan payments may change. You bankruptcy case is dismissed if you fall behind on your payments and can’t make up the difference in a reasonable period.

Get your release and take the second debtor education course.

You made it! The second debtor education course is the last stage before discharge.

If you’ve followed the conditions of your Chapter 13 plan, you’ll receive your discharge. Most overdue unsecured debts will be forgiven. For example, if you were to pay 10% of your unsecured bills, you won’t have to pay the other 90%.

A Full-Service Bankruptcy Law Firm in Michigan assisting clients in filing Chapter 13 bankruptcy.

In filing Chapter 13 bankruptcy, Hammerschmidt Stickradt & Associates will guide you through the entire process. Our attorneys will review your financial situation, explain the law to you, and prepare all paperwork necessary to start the process of filing Chapter 13 bankruptcy.

What’s more, filing Chapter 13 bankruptcy requires a comprehensive knowledge of state and federal laws regarding property exemptions. Hammerschmidt Stickradt & Associates has over 21 years of combined experience in this area. In filing Chapter 13 bankruptcy, you can trust Hammerschmidt Stickradt & Associates to represent your best interests.