Michigan Bankruptcy Laws

If you find yourself in a situation where unexpected events, like a serious illness or job loss, hinder your ability to meet your repayment obligations, it’s important to know that options exist to assist you in managing your financial burdens. Bankruptcy may provide a pathway for you to alleviate your debt and regain control of your financial situation.

While declaring bankruptcy may appear to be an ideal solution, it can have severe consequences such as damaging your credit score, complicating the management of bank accounts and credit cards, leading to the loss of valuable assets, and hindering your ability to secure essential needs like housing, transportation, insurance, or employment. Many financial advisors view bankruptcy as a last resort that should only be pursued after consulting an experienced bankruptcy attorney and exhausting alternatives like budgeting or credit counseling.

If you are considering filing for bankruptcy protection, it is essential to complete a credit counseling class from a government-approved organization within the 180 days leading up to your filing. Additionally, before your debts can be discharged, you must finish a debtor education course.

For more information on these courses and to verify if the course is government-approved, please visit the United States Courts website here

Bankruptcies are typically categorized into two main types which are liquidation known as Chapter 7 and reorganization referred to as Chapter 13.

Further explanations are provided below.

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Make sure you take a look at the links at the end of this article to learn more about bankruptcy

Chapter 7 Bankruptcy

Chapter 7 bankruptcy falls under the liquidation category, so named because it allows the bankruptcy trustee to take and sell certain assets to help repay your debts. However, you have the right to retain property that is considered exempt under state laws. Not everyone qualifies for Chapter 7; for instance, if your disposable income is enough to fund a Chapter 13 repayment plan after deducting certain expenses, you will not be eligible for Chapter 7.

Typically, the process lasts three to six months. During Chapter 7, some of your assets may be liquidated to settle your debts, and in return, most or all of your unsecured debts will be discharged. You are allowed to keep exempt property as defined by state or federal law, including personal belongings like clothing, a vehicle, and household items. Many individuals are relieved to find they can retain significant personal property after filing.

If you have secured debts, such as an auto loan where the vehicle serves as collateral, you can choose to let the creditor repossess the item, continue making payments if agreed upon, or pay a lump sum equivalent to the property’s current value. Additionally, certain secured debts may be discharged through Chapter 7 bankruptcy.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy in Michigan follows federal bankruptcy laws but is also governed by specific rules and regulations. You can find more information on Michigan’s bankruptcy rules and guidelines below:

U.S. Bankruptcy Code – Chapter 13

Chapter 13 bankruptcy serves as a prevalent form of reorganization bankruptcy for consumers, allowing individuals to keep all of their assets while making monthly payments over three to five years to address a portion or all of their debts.

To be eligible for Chapter 13, you must prove you have a steady income that enables you to repay some of your obligations. Once you file, you are required to submit a repayment plan that details how you will manage to pay off your debts within the designated period.

The minimum repayment amount is calculated based on your income, total debt, and the sum your unsecured creditors would have received under Chapter 7 bankruptcy, provided that your total debts are within federal limits. Chapter 13 also gives you the opportunity to catch up on overdue payments for secured debts, aiding in the prevention of foreclosure or repossession by integrating these past-due amounts into your repayment plan.

It is essential to understand that both Chapter 7 and Chapter 13 bankruptcy have specific rules and exceptions concerning which types of debts qualify, who is permitted to file, and what assets can be retained.

While bankruptcy can alleviate many forms of debt, including credit card balances and medical bills, certain responsibilities, such as child support, spousal support, and the majority of tax debts, cannot be discharged through this process.

Seeking guidance from a qualified attorney can provide clarity on your bankruptcy options and help identify the most suitable path for your financial circumstances.

Credit Counseling (Required)

Filing Chapter 7 or Chapter 13 Bankruptcy?

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