Recently I met with a potential client whose primary debt was due to a car repossession in 1998! At the time the vehicle was repossessed the client owed a little over $4,000. Since that time judgment interest has increased the debt to more than $20,000. Under Michigan Law creditors can continue to charge the contract rate of interest after a judgment is entered. In this case the interest rate was 13%. In addition, a judgment, which is valid for 10 years, can be renewed for an additional 10 years. Filing a Chapter 13 bankruptcy would have allowed this person to pay the $4,000 over 36 or 60 months with no interest. Even if you don’t qualify for a Chapter 7 fresh start, often times a Chapter 13 payment plan will be much cheaper than making payments on high interest debt.
