When creditors keep harassing you or your family, debt piles up and your quality
of life goes down, it’s time to consider your financial options. Some individuals
have found significant financial relief by filing for bankruptcy – Chapter 7 – to
discharge most, if not all of their debts. If you are a resident in Michigan and
are looking to wipe the slate clean, consider filing for bankruptcy to get rid of
What is a Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy offers individuals who are overburdened with debt a path
to financial relief. Millions each year in the U.S. file for bankruptcy, and many
of them are able to dismiss most of their credit card debts. While filing for bankruptcy
can be daunting, a knowledgeable attorney who has insight on the bankruptcy process
and the courts can help walk you through the process. Your bankruptcy lawyer will
protect your assets while discharging you debts. A Chapter 7 bankruptcy is considered
a straight, or liquid bankruptcy in which a debtor can discharge most of his debts.
It differs from a
Chapter 13 bankruptcy, which only dismisses a part of the debt owed to creditors
and offers a reorganization plan.
How Will I Be Affected?
There are pros and cons to filing for bankruptcy, Chapter 7 or Chapter 13. The main
positive factor that a Chapter 7 bankruptcy will allow you to discharge your credit
debt, allowing you to become debt-free. There are some exceptions. Some debt, like
school loans, child-support, alimony, and other specific debts will not be discharged
with a Chapter 7 bankruptcy.
While a bankruptcy does affect your credit initially, lowering it approximately
50-75 points after filing, it does not stay on your credit forever. A Chapter 7
bankruptcy will be dismissed from your credit report after ten years. During that
time, you should not have any trouble getting loans to purchase a house or automobile,
obtaining credit, or purchasing other needed items.
What Can I Keep?
When you file for a bankruptcy, Chapter 7, 9, or 13, there are a number of exemptions
that each individual can apply towards his/her financial situation. These exemptions
allow the filer to withhold some personal personal property and financial assets.
The bankruptcy laws in Michigan were recently changed to adjust for inflation. Every
three years, beginning in 2005, as the rate of inflation decreases the value of
a dollar, the state of Michigan adjusts the amount that debtors are allowed to claim
as exempt. This protects debtors and allows them to claim the maximum amount in
Additionally the Bankruptcy Court of Michigan also recognizes both state and federal
laws that govern the process of bankruptcy. What does this mean for someone looking
to file a Chapter 7? It allows filers to choose between the two exemption laws,
giving debtors more options. Some federal laws might not provide as much as state
laws, therefore a debtor can use the laws that benefit him or her the most. It is
best to discuss your bankruptcy options with a qualified Michigan bankruptcy attorney
to see how each set of laws can help you.
Some state exemptions include:
- Homestead - Property cannot exceed $34,450 in value or up to $51,650 if the debtor
is over the age of 65 or disabled. Up t0 40 acres of unplatted property in exempt.
- Household Goods
- Wearing Apparel (not including furs)
- Family Photos
- Up to $3,450 in household furniture and accessories
- Computer and accessories valued up to $575
- Tools of Trade and Machinery - Up to $2000 in value
- Farming - Crops, farm animals and feed up to $2000 in value
- Wages - Up to 60% of earned but unpaid wages
- Automobile - Up to $2,775 in value
- Pensions and Benefits
- 100% Casualty Stock Insurance
- 100% Mutual Life Insurance
- 100% 401k and 403(b) Pensions
- 100%Federal Disability and Death Benefits
- 100% Social Security Benefits
- 100% Public Safety (Policemen, Firemen, etc.) Officer Death Benefits
- All Alimony and Child Support Income
These state exemptions can be used in conjunction with the federal exemptions and
the exemptions can be used in entirety without combining them.
Am I Eligible?
In order to determine if you are eligible for bankruptcy, Chapter 7 or otherwise,
federal law has mandated in 2005 that every potential filer must pass the mean's
test. This test is a procedure that protects the Bankruptcy Court from those looking
to commit fraud. Part of this test examines the debtor's level of income. In the
state of Michigan, the median income level for a single individual is $42,562. For
a family of two the income level raises to $50,738, families of three, $60,161,
and families of four, $71,758. Those looking to file must fall at or below the median
income level for their family size. If you exceed the income level, you still may
be able to pass the mean's test, but your attorney will require additional information
detailing your financial situation.
The best way to find out if you and your family will
qualify for Chapter 7 bankruptcy is to schedule an initial consultation
with a Michigan attorney that handles all types of bankruptcy, Chapter 7, Chapter
9, or Chapter 13. Before your meeting you will want to bring:
- 6-12 Months of Past Pay Stubs for Each Filer
- List of Creditors, Along with Account Numbers
- Last Filed Tax Returns
- A Listing of Debts You Wish to Reaffirm (keep after bankruptcy, such as a car)
After your consultation your attorney will tell you what the best course of action
to take. The more information you provide to your attorney, the easier your bankruptcy
Michigan Bankruptcy Courts
United States Courthouse
111 First Street
Bay City, Michigan 48708
Phone: (989) 894-8840
211 West Fort Steve, Suite 2100
Detroit, Michigan 48226
Phone: (313) 234-0068
Bankruptcy Appellate Panel
One Division Street N, Room 200
Grand Rapids, Michigan 49503-3132
Phone: (616) 456-2693
One Division Street N, Room 200
Grand Rapids, Michigan 49503-2693
Phone: (616) 456-2693
United States Post Office and Courthouse
202 West Washington Street, 3rd Floor
Marquette, Michigan 49855-4036
Phone: (906) 226-2117