Michigan's Bankruptcy Laws in Cases of Foreclosure
A Michigan debtor who has fallen behind on his mortgage payments may be facing foreclosure. If this is the case, the debtor has a few options that do not involve losing his home. The debtor can file a bankruptcy petition. A Chapter 7 petition will only stop foreclosure proceedings temporarily while a Chapter 13 petition can stop foreclosure proceedings for up to five years.
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Chapter 13
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A Michigan debtor must file his Chapter 13 bankruptcy petition with the bankruptcy court. The debtor must also file schedules listing income, expenses, property and debts. The debtor must also file a certificate of credit counseling, tax returns for the previous year and proof of tax returns for the previous four years. After the bankruptcy petition is filed, an automatic stay goes into place. The mortgage company cannot take the home while the debtor's property is under the stay.
Income
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Before a debtor can begin his Chapter 13 case, he must compare his family income with the median family income for a family of the same size in the state of Michigan. If the debtor's income is less than the state median family income, the debtor will spend the next three years repaying his debts. If the debtor's income is more than the state median family income, the debtor will spend the next five years repaying his debts. As of 2010, the Census Bureau listed Michigan's median family income as $43,456 for a single earner, $52,433 for a family of two, $61,517 for a family of three and $74,558 for a family of four. Add $7,500 for each family member in excess of four.
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Repayment Plan
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After the bankruptcy petition has been filed, a bankruptcy trustee will be appointed to the case. The trustee represents the interests of the creditors and will accept monthly plan payments on behalf of the creditors. The debtor must propose a repayment plan to the court. The plan should include all missed mortgage payments. The repayment plan allows the debtor to spread out missed payments over the length of the plan, allowing the debtor time to catch up on his mortgage. The debtor will also need to make regular mortgage payments outside of the plan to keep his house from going into foreclosure. The bankruptcy court will approve the debtor's repayment plan if the creditors and trustee have no objections. Under the plan, the debtor must pay all expenses associated with the bankruptcy case, all priority debts, all missed mortgage payments, all secured debts and anywhere from 0 to 100 percent of unsecured debts. After the debtor has made all plan payments, his house will no longer be in danger of foreclosure, and he will receive a discharge of his debts.
Chapter 7
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If a debtor files Chapter 7, he will receive little help where foreclosure is concerned. The creditor cannot foreclose for about three or four months during the stay. After all eligible debts have been discharged, the debtor must still pay the mortgage he could not pay a few months earlier.
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References
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