If you're falling behind on your mortgage, your car payment, or your bills, you're probably afraid of what comes next. Foreclosure. Repossession. Creditors calling at all hours. It's overwhelming, and it can feel like there's no way to catch up.
Chapter 13 bankruptcy exists for exactly this situation. It lets you keep your home, your car, and your other assets while reorganizing your debt into a manageable repayment plan. If you have steady income and are willing to commit to a plan, Chapter 13 can get your finances back on track.
At Hettinger & Robinson PLC, our Chapter 13 bankruptcy lawyer in Kalamazoo will walk you through every step so you understand the stakes, the benefits, and can make informed decisions about your financial future. Call us at (269) 344-0700 to schedule a consultation.
What Is Chapter 13 Bankruptcy?
Chapter 13 allows individuals and married couples to restructure their debt through a court-supervised repayment plan lasting three to five years. Like other bankruptcies, the court assigns a trustee, but in Chapter 13, the trustee has two additional roles:
- Receiving your monthly payments
- Distributing those payments to your creditors
Debt isn't immediately wiped out like in Chapter 7. Instead, you make affordable monthly payments over the life of the plan. When the plan is complete, any remaining eligible debt is discharged.
Chapter 13 is sometimes called "wage earner's bankruptcy" because you need regular income to qualify. It's designed to help you get caught up on secured debts like mortgages while resolving other obligations.
Eligibility for Chapter 13 Bankruptcy
The requirements are specific:
- Regular income. You must have steady income, whether from employment, self-employment, or an unincorporated business.
- Individual or married couple. Organizations, companies, and partnerships cannot file Chapter 13.
- Unsecured debt limit. Your unsecured debts cannot exceed $465,275 (subject to change under 11 U.S.C. Section 109(e)).
- Secured debt limit. Your secured debts cannot exceed $1,395,875 (subject to change under 11 U.S.C. Section 109(e)).
- No recent dismissals. A prior bankruptcy petition cannot have been dismissed in the past 180 days due to failure to appear or comply with court orders, or voluntarily dismissed because creditors sought to lift an automatic stay.
- Credit counseling. You must have completed counseling from an approved agency.
Who Should File for Chapter 13 Bankruptcy in Michigan?
You can file Chapter 13 if you:
- Own property or have a permanent residence in the United States
- Haven't filed Chapter 7 in the last four years
- Haven't filed Chapter 13 in the last two years
- Meet the eligibility criteria
Common Reasons Michigan Residents File Chapter 13
Chapter 13 may be the right choice if:
- You're behind on your mortgage and at risk of foreclosure, but you want to keep your home
- You're behind on vehicle payments and facing repossession
- You're behind on utilities and risk having service shut off
- You filed Chapter 7 more than four years ago and still have unresolved debt
- A creditor has garnished your wages, filed a lawsuit, or frozen your bank account
- You own a sole proprietorship with too much debt (you can file under your own name)
- You have student loans, which can't be discharged in Chapter 7 but may be eligible for discharge in Chapter 13 if you can demonstrate economic hardship
Reasons Not to File
Chapter 13 might not be right for you if you're not confident you can stick with the repayment plan. Chapter 13 has a higher failure rate than Chapter 7. If you fall behind on payments, creditors can resume collection activity, garnish wages, freeze accounts, and potentially foreclose on your home or repossess your vehicle.
Talk to a Chapter 13 attorney before deciding. After reviewing your financial situation, we can give you an honest assessment of your chances of success.
How Much Does It Cost to File for Chapter 13 Bankruptcy in Michigan?
Court filing fees for Chapter 13, mandated by the U.S. Bankruptcy Court, include:
- Filing fee
- Administrative fee
- Trustee surcharge
These total just over $300, similar to Chapter 7 fees.
Attorney fees are typically higher than Chapter 7 because the case is more involved. Fees range from $1,000 to $5,000 or more depending on location, experience, and case complexity.
The repayment plan itself is also a cost to plan for. Your monthly payment amount depends on your income, total debt, and what types of debt you owe.
Documents You'll Need for Chapter 13 Bankruptcy
Here's what to gather before filing:
- List of all creditors with most recent statements
- Names and addresses of any cosigners
- List of all property (real and personal)
- Monthly living expenses (food, clothing, housing, utilities, medicine, transportation, taxes)
- Proof of income: source, amount, and frequency (start with recent paystubs)
Additional helpful documents:
- Most recent tax return
- Credit reports from Equifax, Experian, and TransUnion
- Bank account statements from the last 12 months
- Divorce decrees or court orders related to debt or support obligations
If you're married, both spouses must provide income and expense information, even if only one spouse is filing. The court needs a complete picture of your household finances. Your attorney will advise you on any additional documents specific to your situation.
What Happens After You File for Chapter 13 in Michigan?
When you file, you receive a case number and a Notice of Bankruptcy Case Filing. You can use this to prove to any creditor that you're protected by an automatic stay. Chapter 13 bankruptcy stays on your credit report for seven years.
After filing, you have three key obligations:
341 Meeting of Creditors
You're required to attend this meeting. If you have an attorney, they'll be there to guide you through it. If you've provided all required documents and disclosed all assets and financial information, the meeting is usually straightforward.
Financial Management Course
You must complete an approved financial management course before your bankruptcy concludes. Your case will last three to five years, but you need to finish the course and file the certificate with the court before the case closes.
Making Your Payments
This is the most critical part. Your first payment is typically due the first of the month after you file. Payments must be made on time. If you fall behind:
- Creditors can resume collection calls
- Your wages can be garnished
- Your bank account can be frozen
- Your home could face foreclosure
- Your vehicle could be repossessed
Sticking to your payment plan is how you successfully complete Chapter 13. When you do, any remaining dischargeable debt is eliminated. You'll have your finances in order and your home and vehicles protected.