Overwhelming debt can be impossible to overcome once it reaches a certain point. Michigan residents who lack the income and assets to address their debt situation may seek protection under the appropriate bankruptcy law. Those who file Chapter 13 bankruptcy will submit a payment plan to cover payments on their restructured debt. Such an approach can lead to a fresh financial start.
Payment plans and Chapter 13
Those who pass the means test for Chapter 7 bankruptcy will liquidate their assets to cover their debts. The remaining debt becomes discharged. Those not qualifying for Chapter 7 may file for Chapter 13 bankruptcy. With Chapter 13, some debt faces a discharge, and some debt ends up restructured. The debtor submits a payment plan – typically a three to five-year payment plan – to repay the remaining debt to creditors.
The bankruptcy court does not dictate a payment plan to the debtor. Instead, the debtor submits a payment plan to the court. The court may then approve the plan or deny it. The debtor could resubmit a new payment plan if the court declines the initial one.
Points about Chapter 13 bankruptcy
Anyone seeking assistance under Chapter 13 must have an income, which is why the filing category is sometimes referred to as wage earner’s bankruptcy. Also, the debtor does not directly pay the creditor. A Chapter 13 trustee receives the payments and issues them to the creditor. A trustee will report any missed payment by the debtor to the courts.
The paperwork for a payment plan should include vital information, such as proof of income, a list of assets, tax returns, living expense itemizations and more. Debtors must make sure all paperwork is in order. Otherwise, there may be unnecessary delays or initial denials.