The last several posts on this blog have discussed how filing a Chapter 13 bankruptcy can be advantageous to some Michigan residents who are struggling with debt. While the decision to file a Chapter 13 as opposed to a more common Chapter 7 bankruptcy of course depends on a debtor's individual situation, a Michigan resident who is contemplating whether or not to file Chapter 13 may want to be mindful of what his or her obligations will be throughout the three to five year process.
In many cases, these legal obligations are more extensive or somewhat different than for those who choose to file a Chapter 7 bankruptcy. For example, unlike in a Chapter 7, a debtor must generally agree to repay some of his or her creditors at least part of what he or she owes. At a bare minimum, he or she will have to file a repayment plan with the court and, assuming the plan gets approved, follow that plan to the letter.
Furthermore, because a person who files Chapter 13 will be involved in a bankruptcy for up to five years, he or she cannot simply go on with his or her life right away. He or she will have to keep up on child support payments as well as any court-ordered alimony. Moreover, he or she must continue to file his or her taxes and, in some cases, other financial reports. Finally, the filer may not take on any additional debt without the court's permission.
While there are additional legal obligations involved in filing a Chapter 13 bankruptcy, they may well be worth it if a Chapter 13 can put a Michigan resident in a better financial position than would a Chapter 7. A person should be fully informed before filing any form of personal bankruptcy so as to be able to make the best decision possible.
Source: Findlaw, "What are a debtor's obligations under Chapter 13?" accessed Sept. 2, 2014.