- You must file a debt repayment plan in the Michigan bankruptcy court either with your Chapter 13 petition or within 15 days of filing the petition. The debt repayment plan should provide for the payment of all administrative claims, all priority debts, all mortgage defaults and other secured debts and a percentage of unsecured debts. If your debt repayment plan does not pay certain debts in full, the bankruptcy court will not approve the plan.
- Chapter 13 bankruptcy is known as the wage earner plan, because the typical debtor who files for Chapter 13 bankruptcy is bringing in wages each month. As the debtor brings in wages, the bankruptcy trustee accepts payment toward the debtor's repayment plan. In Michigan, the bankruptcy court does not limit the means by which you can fund your debt repayment plan. You could fund your plan with your monthly paycheck, or you could just as easily fund your plan with worker's compensation benefits.
- Before you begin your Chapter 13 bankruptcy case, you must take the means test. The means test compares your family income to the median income for a family of your family's size in Michigan. The means test also shows the bankruptcy court the amount of disposable income you will have each month after paying certain expenses and certain debts. The bankruptcy court needs to know the amount of disposable income you will have, because you must use all of your disposable income to fund your debt repayment plan. If you do not have enough disposable income to successfully fund a Chapter 13 debt repayment plan, you cannot file for Chapter 13 bankruptcy.
- The means test uses family income to determine your repayment capacity. Therefore, if you are married, the Michigan bankruptcy court will look at your income and the income of your spouse to determine your ability to complete a debt repayment plan. If your spouse receives worker's compensation benefits, you can also use this income to fund your plan.
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