Question 1

What is Chapter 13 bankruptcy?

Accepted Answer

Chapter 13 is a reorganization bankruptcy that allows individuals with regular income to keep their property while repaying some or all of their debts through a court-approved 3-to-5-year repayment plan. It is particularly useful for catching up on mortgage arrears, car payments, or tax debts.

Question 2

Who qualifies for Chapter 13 bankruptcy?

Accepted Answer

To qualify for Chapter 13, you must have regular income sufficient to fund a repayment plan, and your debts must fall within certain limits. As of 2024, there is no longer a specific debt limit for Chapter 13 cases following the BAPCPA sunset provision, but you must demonstrate an ability to make plan payments.

Question 3

How long is a Chapter 13 repayment plan?

Accepted Answer

The plan length depends on your income. If your income is below Michigan's median for your household size, the plan can be 3 years (36 months). If your income is above the median, the plan must be 5 years (60 months). You can always propose a longer plan up to 60 months if you choose.

Question 4

Can Chapter 13 save my home from foreclosure?

Accepted Answer

Yes. Chapter 13 is one of the most powerful tools for saving a home from foreclosure. The automatic stay stops the foreclosure immediately, and your repayment plan can include all missed mortgage payments (arrears) spread over 3 to 5 years while you resume making regular monthly mortgage payments going forward.

Question 5

What is a Chapter 13 cramdown?

Accepted Answer

A cramdown allows you to reduce the principal balance on certain secured debts to the current market value of the collateral. For example, if you owe $15,000 on a car worth $10,000, you can reduce the secured claim to $10,000. Cramdown is available for car loans originated more than 910 days before filing, but is not available for your primary home mortgage.

Question 6

What is lien stripping in Chapter 13?

Accepted Answer

Lien stripping removes a junior mortgage (such as a second mortgage or HELOC) from your home when the property's current value is less than the balance owed on the first mortgage. The stripped lien is treated as unsecured debt in your repayment plan, potentially receiving pennies on the dollar or nothing at all.

Question 7

Can I modify my Chapter 13 plan after confirmation?

Accepted Answer

Yes. If your financial circumstances change significantly after your plan is confirmed — such as a job loss, medical emergency, or income increase — you can request a plan modification from the court. The modified plan must still meet all Chapter 13 requirements.

Question 8

What happens if I miss a Chapter 13 payment?

Accepted Answer

Missing plan payments can result in your case being dismissed, which would remove the automatic stay and allow creditors to resume collection actions. If you anticipate difficulty making a payment, contact your attorney immediately to discuss options such as plan modification or a brief payment suspension.

Question 9

Can I pay off my Chapter 13 plan early?

Accepted Answer

Yes, you can pay off your Chapter 13 plan early if you come into extra money (such as an inheritance or bonus). However, paying early may affect how much unsecured creditors receive, as the plan must still meet the 'best interest of creditors' and 'projected disposable income' tests.

Question 10

What is the Chapter 13 trustee's role?

Accepted Answer

The Chapter 13 trustee collects your monthly plan payments and distributes them to your creditors according to the terms of your approved plan. The trustee also reviews your plan for compliance with bankruptcy law, examines you at the 341 meeting, and objects to the plan if it does not meet legal requirements.

Question 11

Can Chapter 13 help with car loan payments?

Accepted Answer

Yes, Chapter 13 can help in several ways: you can catch up on missed payments through the plan, reduce the interest rate on your car loan, and in some cases use a cramdown to reduce the loan balance to the car's current value. This makes Chapter 13 a powerful tool for keeping a vehicle you might otherwise lose.

Question 12

Do I keep my tax refund in Chapter 13?

Accepted Answer

It depends on your plan and your trustee's policies. Some Chapter 13 trustees in Michigan require debtors to turn over tax refunds above a certain amount (often $2,000 to $3,000) to be applied to the plan. Your attorney can negotiate this during the plan confirmation process.

Question 13

What is Chapter 7 bankruptcy?

Accepted Answer

Chapter 7 is a liquidation bankruptcy that eliminates most unsecured debts in approximately 3 to 6 months. A court-appointed trustee reviews your assets, and any non-exempt property may be sold to pay creditors. However, most Michigan filers keep all their property because it falls within exemption limits.

Question 14

Who qualifies for Chapter 7 bankruptcy?

Accepted Answer

To qualify for Chapter 7, you must pass the means test, which compares your household income to Michigan's median income for your household size. If your income is below the median, you automatically qualify. If above, further calculations determine whether you have enough disposable income to fund a Chapter 13 plan instead.

Question 15

What is the means test?

Accepted Answer

The means test is a calculation that determines whether your income is low enough to qualify for Chapter 7 bankruptcy. It compares your average monthly income over the past six months to Michigan's median income for your household size. If your income exceeds the median, a second part of the test deducts allowed expenses to determine disposable income.

Question 16

How long does Chapter 7 bankruptcy take?

Accepted Answer

A typical Chapter 7 case in Michigan takes about 3 to 6 months from filing to discharge. The meeting of creditors (341 meeting) occurs about 30-45 days after filing, and the discharge is usually granted approximately 60 days after the meeting if there are no objections or complications.

Question 17

What happens to my property in Chapter 7?

Accepted Answer

The bankruptcy trustee evaluates your property against applicable exemptions. Property that is fully exempt (protected) stays with you. Non-exempt property may be sold by the trustee to pay creditors. In practice, most Chapter 7 cases in Michigan are 'no-asset' cases where the debtor keeps everything.

Question 18

Can I keep my car in Chapter 7?

Accepted Answer

Usually yes. If your car's equity is within the applicable exemption amount ($4,250 under Michigan state exemptions or $5,025 under federal exemptions) and you continue making loan payments, you can keep your vehicle. You may need to sign a reaffirmation agreement with the lender to continue the loan.

Question 19

Can I keep my house in Chapter 7?

Accepted Answer

You can keep your home in Chapter 7 if the equity is within the homestead exemption ($46,125 state or $31,575 federal) and you stay current on your mortgage payments. If you have significant equity beyond the exemption, Chapter 13 may be a better option to protect your home.

Question 20

What is a reaffirmation agreement?

Accepted Answer

A reaffirmation agreement is a voluntary contract between you and a creditor to continue paying a debt that would otherwise be discharged in Chapter 7. It is most commonly used for car loans when you want to keep the vehicle. By reaffirming, you give up your right to discharge that specific debt.

Question 21

What is a no-asset Chapter 7 case?

Accepted Answer

A no-asset case means the trustee has determined that all of your property is either exempt or has no value that could be distributed to creditors. The vast majority of consumer Chapter 7 cases in Michigan are no-asset cases, and creditors receive no payment from the estate.

Question 22

Can I convert my Chapter 7 case to Chapter 13?

Accepted Answer

Yes. If your circumstances change or if Chapter 7 is not working for your situation, you generally have the right to convert your case to Chapter 13 at any time, provided you have regular income and meet Chapter 13 eligibility requirements.

Question 23

Will Chapter 7 stop foreclosure on my home?

Accepted Answer

Chapter 7 will temporarily stop foreclosure through the automatic stay, but it does not provide a way to catch up on missed mortgage payments. The lender can request relief from the stay to proceed with foreclosure. If you need to save your home, Chapter 13 is usually a better option because it allows you to repay mortgage arrears over time.

Question 24

What debts survive Chapter 7?

Accepted Answer

Debts that typically survive Chapter 7 include most student loans, tax debts less than three years old, child support and alimony, debts from fraud or false financial statements, debts from willful and malicious injury, DUI-related debts, criminal fines and restitution, and any debts not listed in your petition.

Question 25

Is Social Security income included in the means test?

Accepted Answer

No. Social Security benefits are specifically excluded from the means test calculation by federal law. This means many retirees and disabled individuals relying primarily on Social Security income easily qualify for Chapter 7 regardless of the amount they receive.

Question 26

How much does it cost to file for bankruptcy?

Accepted Answer

The court filing fee is $338 for Chapter 7 and $313 for Chapter 13. Attorney fees in Michigan typically range from $1,000 to $2,000 for Chapter 7 and $2,500 to $5,000 for Chapter 13. Credit counseling and debtor education courses cost about $25-50 each. Low-income filers may qualify for a fee waiver.

Question 27

Can I pay the filing fee in installments?

Accepted Answer

Yes. If you cannot afford to pay the filing fee all at once, you can apply to pay in up to four installments over 120 days. In Chapter 7 cases, you may also qualify for a complete fee waiver if your household income is below 150% of the federal poverty guidelines.

Question 28

How much do bankruptcy attorneys charge in Michigan?

Accepted Answer

Attorney fees for Chapter 7 in Michigan generally range from $1,000 to $2,000, depending on the complexity of your case and the attorney's experience. Chapter 13 fees typically range from $2,500 to $5,000, with the majority of the fee paid through your repayment plan over time rather than upfront.

Question 29

Are there free bankruptcy resources available?

Accepted Answer

Yes. Michigan has legal aid organizations that may provide free or reduced-cost bankruptcy assistance to qualifying low-income individuals. The U.S. Bankruptcy Court websites also offer free forms and information. Some attorneys offer free initial consultations to evaluate your situation.

Question 30

Do I have to pay for credit counseling and debtor education?

Accepted Answer

Yes, both courses are required and typically cost $25-50 each. However, approved agencies must offer fee waivers or reduced fees to debtors who cannot afford the full cost. Many providers offer convenient online courses that can be completed from home.

Question 31

Is filing for bankruptcy cheaper than paying off my debt?

Accepted Answer

In many cases, yes. If you owe tens of thousands of dollars in credit card debt and medical bills with high interest rates, the total cost of bankruptcy (filing fee plus attorney fees) may be far less than continuing to pay minimum payments or attempting to settle debts. A bankruptcy attorney can help you compare the true costs.

Question 32

Can Chapter 13 attorney fees be included in my repayment plan?

Accepted Answer

Yes. In Chapter 13 cases, most of the attorney's fee is typically paid through your repayment plan, meaning you do not need to come up with the full fee upfront. You generally pay a smaller retainer before filing, and the remaining balance is paid through your monthly plan payments over the life of the plan.

Question 33

How long does bankruptcy stay on my credit report?

Accepted Answer

A Chapter 7 bankruptcy stays on your credit report for 10 years from the filing date. A Chapter 13 bankruptcy stays for 7 years from the filing date. Individual accounts included in the bankruptcy may be removed sooner, as negative account information generally falls off after 7 years.

Question 34

Can I rebuild my credit after bankruptcy?

Accepted Answer

Yes, and many people see their credit scores improve within 1-2 years after discharge. Key strategies include obtaining a secured credit card and using it responsibly, making all post-bankruptcy payments on time, keeping credit utilization low, monitoring your credit reports for errors, and being patient as the impact of bankruptcy diminishes over time.

Question 35

Can I get a credit card after bankruptcy?

Accepted Answer

Yes. Secured credit cards, which require a cash deposit as collateral, are available almost immediately after discharge. Using a secured card responsibly for 6-12 months often leads to offers for unsecured cards. Many people are surprised by how quickly credit offers appear after their discharge.

Question 36

Can I buy a house after bankruptcy?

Accepted Answer

Yes, but there are waiting periods. For an FHA loan, you must wait at least 2 years after a Chapter 7 discharge or 1 year into a Chapter 13 plan with court approval. For a conventional loan, the wait is typically 4 years after Chapter 7 or 2 years after Chapter 13. Rebuilding your credit during this time is essential.

Question 37

Can I get a car loan after bankruptcy?

Accepted Answer

Yes. Auto lenders are often willing to work with people shortly after bankruptcy discharge, sometimes even immediately, although the interest rate will initially be higher. As you rebuild your credit over the next 1-2 years, you can refinance at a better rate. Making consistent, on-time payments accelerates credit recovery.

Question 38

Will bankruptcy affect my ability to rent an apartment?

Accepted Answer

Some landlords check credit reports and a bankruptcy filing may affect their decision. However, many landlords are primarily concerned with current income, rental history, and references. Being upfront about your situation and demonstrating stable income can help. Over time, the impact diminishes as you rebuild your credit.

Question 39

What is a good credit score to aim for after bankruptcy?

Accepted Answer

Many people achieve a credit score of 650-700 within two years of their discharge by following good credit habits. A score above 700 is generally considered good and opens up most lending opportunities. Focus on making all payments on time, keeping credit utilization below 30%, and building a diverse mix of credit accounts.

Question 40

Should I check my credit report after bankruptcy?

Accepted Answer

Absolutely. Review your credit reports from all three bureaus (Equifax, Experian, TransUnion) within 60-90 days of your discharge to ensure all discharged debts are reported correctly. Dispute any debts that still show as active or past due — they should show a zero balance and discharged status.

Question 41

Can creditors still report discharged debts?

Accepted Answer

Creditors must update your credit report to reflect that a debt was discharged in bankruptcy. They cannot report it as delinquent or past due after the discharge. If a creditor continues to report inaccurately, you can dispute the entry with the credit bureaus and may have legal recourse against the creditor.

Question 42

Will bankruptcy affect my spouse's credit?

Accepted Answer

If only one spouse files for bankruptcy, the non-filing spouse's credit is not directly affected. However, if you have joint debts, the filing spouse's discharge does not eliminate the non-filing spouse's responsibility for those debts, and the creditor may pursue collection against the non-filing spouse.

Question 43

What are bankruptcy exemptions?

Accepted Answer

Exemptions are laws that protect certain types and amounts of property from being taken by the trustee in bankruptcy. They ensure you can keep essential assets like your home, car, clothing, and retirement savings. Michigan allows debtors to choose between state and federal exemption systems.

Question 44

Can I choose between Michigan state and federal exemptions?

Accepted Answer

Yes. Michigan is one of the states that allows debtors to choose between the state exemption system and the federal bankruptcy exemption system. However, you must use one system exclusively — you cannot mix and match exemptions from both systems in the same case.

Question 45

What is the Michigan homestead exemption?

Accepted Answer

Michigan's state homestead exemption protects up to $46,125 of equity in your primary residence. If you are 65 years or older or disabled, the exemption increases to $69,200. The federal homestead exemption is $31,575, but it can be doubled to $63,150 in a joint filing.

Question 46

Which exemption system is better — state or federal?

Accepted Answer

The best system depends on your specific assets. Generally, Michigan state exemptions are better if you have significant home equity (especially if you are over 65), while federal exemptions are often better for renters or non-homeowners because the federal wildcard exemption allows unused homestead to protect other property.

Question 47

What is the wildcard exemption?

Accepted Answer

The wildcard exemption can be applied to any type of property. Michigan's state system does not include a wildcard, but the federal system offers $1,475 that can protect any property, plus up to $13,950 of unused homestead exemption. This means non-homeowners using federal exemptions can protect up to $15,425 of any property.

Question 48

Are retirement accounts protected in bankruptcy?

Accepted Answer

Yes. ERISA-qualified retirement accounts such as 401(k)s, 403(b)s, and pensions are fully exempt with no dollar limit under both state and federal exemption systems. Traditional and Roth IRAs are protected up to $1,512,350. Rollovers from qualified plans to IRAs retain unlimited protection.

Question 49

How much of my car is protected in bankruptcy?

Accepted Answer

Under Michigan state exemptions, you can protect up to $4,250 of equity in one motor vehicle. Under federal exemptions, the vehicle exemption is $5,025. If your car's equity exceeds the exemption, you may be able to use additional exemptions or consider Chapter 13 to keep the vehicle.

Question 50

Are my household goods protected in bankruptcy?

Accepted Answer

Yes. Under Michigan state exemptions, household goods are protected up to $450 per item with a $3,000 aggregate limit. Under federal exemptions, the limit is $775 per item with a $16,425 aggregate limit. Most people's household furnishings and appliances fall well within these limits.

Question 51

What happens if I have property that exceeds the exemption limits?

Accepted Answer

In Chapter 7, a trustee could sell the non-exempt property and distribute the proceeds to creditors, returning any exempt amount to you. In Chapter 13, you keep all your property but must pay unsecured creditors at least the value of your non-exempt assets through your repayment plan.

Question 52

Can married couples double their exemptions?

Accepted Answer

Under federal exemptions, married couples filing jointly can each claim the full set of exemptions, effectively doubling the amounts. Under Michigan state exemptions, most exemptions cannot be doubled, and notably the state homestead exemption cannot be doubled in joint filings.

Question 53

What is the 2-year residency requirement for exemptions?

Accepted Answer

You must have lived in Michigan for at least 730 days (2 years) before filing to use Michigan's state exemptions. If you moved to Michigan within the past 2 years, you may need to use the exemptions from your previous state or opt for the federal exemption system.

Question 54

Are wages protected in Michigan bankruptcy?

Accepted Answer

Yes. Michigan protects 60% of earned but unpaid wages for heads of household and 40% for others, with a minimum of $15 per week for each category. Once wages are deposited into a bank account, they may lose their exempt status after a period of time, so timing matters.

Question 55

What is bankruptcy?

Accepted Answer

Bankruptcy is a legal process under federal law that helps individuals and businesses eliminate or repay their debts under the protection of the bankruptcy court. It provides a fresh financial start by either discharging qualifying debts or creating a structured repayment plan.

Question 56

What are the different types of bankruptcy?

Accepted Answer

The most common types for individuals are Chapter 7 (liquidation) and Chapter 13 (reorganization with a repayment plan). Chapter 11 is primarily for businesses or individuals with very large debts. Chapter 12 is specifically for family farmers and fishermen with regular annual income.

Question 57

Is bankruptcy the right choice for me?

Accepted Answer

Bankruptcy may be the right choice if you are unable to pay your debts, facing lawsuits or wage garnishments, or at risk of foreclosure or repossession. However, you should consider alternatives like debt negotiation, credit counseling, or debt consolidation first. Consulting with a bankruptcy attorney is the best way to evaluate your specific situation.

Question 58

Will I lose everything if I file for bankruptcy?

Accepted Answer

No. Bankruptcy exemptions protect essential property such as your home, car, clothing, household goods, retirement accounts, and tools of trade up to specified limits. Most people who file for Chapter 7 in Michigan keep all of their property because it falls within exemption limits.

Question 59

Can married couples file for bankruptcy together?

Accepted Answer

Yes, married couples can file a joint bankruptcy petition, which is often more efficient and less expensive than filing separately. Both spouses' debts, assets, income, and expenses are included in a single case. However, only one spouse is required to file if the debt is primarily in one person's name.

Question 60

What debts can be eliminated in bankruptcy?

Accepted Answer

Most unsecured debts can be discharged, including credit card balances, medical bills, personal loans, utility bills, and old cell phone contracts. However, certain debts cannot be discharged, such as most student loans, recent tax debts, child support, alimony, and debts arising from fraud or drunk driving injuries.

Question 61

Can I file for bankruptcy more than once?

Accepted Answer

Yes, but there are waiting periods. You must wait 8 years between Chapter 7 filings, 2 years between Chapter 13 filings, 6 years after a Chapter 13 to file Chapter 7 (unless you paid 100% of unsecured debts or 70% under a good-faith plan), and 4 years after a Chapter 7 to file Chapter 13.

Question 62

What is the difference between secured and unsecured debt?

Accepted Answer

Secured debt is backed by collateral that the creditor can seize if you default, such as a mortgage (secured by your home) or auto loan (secured by your car). Unsecured debt has no collateral backing, including credit cards, medical bills, and personal loans. Bankruptcy treats these categories differently.

Question 63

Can bankruptcy stop a lawsuit against me?

Accepted Answer

Yes. The automatic stay that goes into effect when you file bankruptcy stops most pending lawsuits, including debt collection lawsuits, wage garnishment actions, and foreclosure proceedings. The stay remains in effect for the duration of the case unless a creditor successfully moves to have it lifted.

Question 64

Do I need an attorney to file for bankruptcy?

Accepted Answer

While you can technically file without an attorney (pro se), it is strongly discouraged. Bankruptcy law is complex, and mistakes can lead to loss of property, denial of your discharge, or dismissal of your case. An experienced bankruptcy attorney helps ensure you maximize your exemptions and successfully complete the process.

Bankruptcy FAQ

Chapter 13

Chapter 7

Costs

Credit

Exemptions

General

Process

State Specific