Chapter 13 Background
A Chapter 13 bankruptcy filing is known as a “reorganization” bankruptcy, whereby the debtor’s debts are reorganized into a repayment plan. Chapter 13 bankruptcy is available to consumers. The major difference between filing under Chapter 13 and Chapter 7 is that under a Chapter 7 filing, the debtor’s assets are liquidated to pay back the debtor’s creditors.
Chapter 13 bankruptcy allows the debtor to enter into a payment plan to satisfy all or part of the claims against him/her. Typically the repayment plan will last from three to five years, depending upon the debtor’s income. The repayment plan will extend for three years if the debtor’s income is below the applicable state median level. If the debtor’s income level is above the applicable state median level, then the repayment plan is extended up to five years.
It’s highly recommended that you contact your local Michigan bankruptcy attorney to discuss the advantages and disadvantages of filing under Chapter 13.
Chapter 13 vs. Chapter 7
There are certainly advantages along with disadvantages with filing under Chapter 13. The major advantage is that the debtor is able to keep a valuable asset that may not be protected under a Chapter 7 filing. In addition, a Chapter 13 plan allows you to satisfy your creditors through a Court-approved repayment plan.
The disadvantage of filing under Chapter 13 is that you will have to repay some or all of your debts to your creditors. People that don’t qualify to file under Chapter 7 are allowed to file under Chapter 13.
Speak with a Lawyer Today
If you are considering bankruptcy and would like to learn more about your options, we would be glad to meet with you and review your situation during a consultation at our Troy office.