Michigan Chapter 13 Bankruptcy: Stop Garnishments and Save Your Home

What Chapter 13 Does in Michigan

Chapter 13 creates a court-approved repayment plan (usually three to five years) that can help you catch up on secured debts and protect assets while you maintain steady income. Filing the petition triggers the automatic stay, which generally pauses most collection actions, including many wage garnishments and foreclosure proceedings. See U.S. Courts: Chapter 13 Basics and 11 U.S.C. § 362.

Stopping Wage Garnishments

After you file, most wage garnishments should stop when the court or trustee notifies your employer. If a garnishment continues, your attorney can provide the case number to the creditor or payroll department and, if necessary, seek court enforcement. Some garnishments especially for ongoing domestic support obligations can continue despite the stay. See 11 U.S.C. § 362(b)(2).

Saving Your Home from Foreclosure

Chapter 13 allows you to cure past-due mortgage payments over time while you resume regular monthly payments going forward. If you file before a scheduled sheriff’s sale, the automatic stay may stop the sale and give you an opportunity to work toward loan reinstatement, provided you stay current on both ongoing mortgage and plan payments. See 11 U.S.C. § 1322(b)(5) and § 362. Timing is critical; consult counsel promptly.

Handling Tax Debts and Car Loans

Priority income taxes are generally paid in full through the plan, while some penalties and older income taxes may be treated differently. See 11 U.S.C. § 1322(a)(2) and § 507(a)(8). Chapter 13 can also address vehicle loans often curing arrears and, in some cases, adjusting interest under the Till formula subject to Code limits (for example, rules affecting recently purchased vehicles). See Till v. SCS Credit Corp., 541 U.S. 465 (2004) and 11 U.S.C. § 1325. Treatment depends on your facts and the applicable provisions.

Exemptions and Protecting Equity

Most Michigan filers may choose between Michigan and federal exemption systems to protect home equity, vehicles, retirement accounts, and personal property. The choice can significantly affect plan feasibility and monthly payments, and may be affected by how long you’ve lived in Michigan. See 11 U.S.C. § 522 and Michigan Legal Help.

Who Qualifies for Chapter 13

• Individuals with regular income who can make monthly plan payments.
• Completion of a pre-filing credit counseling course and, before discharge, a debtor education course. See U.S. Courts: Chapter 13 Basics.
• Debt limits apply and can change by statute your attorney can confirm current thresholds under 11 U.S.C. § 109(e).

The Michigan Chapter 13 Process

After pre-filing counseling and document collection, your attorney files the petition and schedules. The automatic stay takes effect, creditors are notified, and a Chapter 13 trustee is assigned. You’ll attend a meeting of creditors, propose a repayment plan, and begin plan payments. Once the court confirms your plan, you continue payments until completion and complete debtor education to obtain a discharge. See U.S. Courts.

Local Considerations in Michigan

Cases are filed in the Eastern or Western District of Michigan. Local rules, trustee guidelines, and model plan forms vary by district and sometimes by judge. Review local resources at the U.S. Bankruptcy Court for the Eastern District of Michigan and the U.S. Bankruptcy Court for the Western District of Michigan.

Common Pitfalls to Avoid

• Missing ongoing mortgage or plan payments after filing, risking dismissal or loss of stay protection.
• Failing to promptly notify payroll of the bankruptcy, allowing garnishments to continue longer than necessary.
• Omitting creditors or assets from schedules.
• Incurring new debt without court approval during the plan.
• Letting taxes or insurance lapse on your home.

FAQ

Will Chapter 13 stop a wage garnishment immediately?

Often, yes. The automatic stay generally stops most garnishments upon filing, but processing notice to payroll can take a short time. Your attorney can expedite notice.

Can I keep my house and car in Chapter 13?

Usually, if you can keep up with ongoing payments and cure arrears through the plan, and your exemptions or plan terms protect your equity.

What happens if I miss a plan payment?

Missing payments can lead to a motion to dismiss or relief from stay. Contact your attorney immediately to discuss options such as a plan modification.

Do all tax debts get discharged?

No. Priority income taxes are typically paid in full in the plan; dischargeability of older taxes depends on timing and other criteria.

How We Help

We evaluate your income, assets, arrears, and garnishments to determine whether Chapter 13 fits your goals. We prepare and file your case, communicate with creditors and payroll, propose a feasible plan, and guide you through confirmation and completion. If your circumstances change, we can seek plan modifications or other relief to keep your case on track. Ready to take the next step? Contact us.

Disclaimer: This article is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. Federal bankruptcy law applies in Michigan, but local rules and your facts matter. Laws and procedures change; consult a licensed Michigan bankruptcy attorney about your situation.