Because we couldn’t include everything in one article, you’ll want to check out its companion, What You Need to Know to File for Bankruptcy. You’ll find lots more details there.

How Does Bankruptcy Work in Michigan?

In most respects, filing for bankruptcy in Michigan isn’t different from filing in another state. The bankruptcy process falls under federal law, not Michigan state law, and works by unwinding the contracts between you and your creditors. That’s what gives you a fresh start.

But Michigan’s laws come into play in a significant way because they determine the property you can keep in your bankruptcy case. You’ll also need to know other filing information, which we explain after reviewing some basics.

How Do I Choose the Right Bankruptcy Chapter in Michigan?

Most people file either Chapter 7 or Chapter 13, and you’re not alone if you don’t know how the two differ. The short explanation below and our handy Chapter 7 versus 13 chart will help clarify things.

Filing for Chapter 7 in Michigan

Chapter 7 is often a bankruptcy filer’s first choice for several reasons. It’s quick, taking only a few months to complete. And it’s cheap. You don’t pay anything to creditors.

Chapter 7 bankruptcy works well for people who own mainly the essential items needed to live and work and not much else. People with more assets could lose them in Chapter 7 because the Chapter 7 trustee, the official responsible for the case, sells unnecessary luxury items and distributes the proceeds to creditors. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamas, even your house or vehicle if you have more equity than you’re allowed to keep.

Also, unlike Chapter 13, Chapter 7 has no payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you’re behind on the loan when you file.

Filing for Chapter 13 in Michigan

Chapter 13 involves repaying creditors some or all of what’s owed using a three- to five-year repayment plan. Chapter 13 filers keep everything they own, and the payment plan provides ways to improve sticky financial situations.

For instance, you can catch up on late payments and save your home from foreclosure or your car from repossession. Also, if you need time to repay a debt you can’t eliminate or “discharge” in bankruptcy, you can use Chapter 13 to force a creditor into a payment plan and repay your balance over time. Learn more about when filing for Chapter 13 is better than Chapter 7.

The biggest downside to this chapter? It can be expensive. Many people can’t afford the monthly payment. Also, businesses can’t file a Chapter 13 case. If you’re a business owner, it’s a good idea to learn about the ins and outs of small business bankruptcies before choosing the bankruptcy right for you.

Not Sure What to Expect in Bankruptcy?

Will Filing for Bankruptcy in Michigan Erase My Debts?

Bankruptcy wipes out many bills, like credit card balances, overdue utility payments, medical bills, personal loans, and more. You can even get rid of a mortgage or car payment if you’re willing to give up the house or car that secures the debt. (Putting property up as collateral creates a “secured debt.” If you don’t pay what you owe, the lender recovers the property.)

But you can’t discharge all debts. You’ll want to be sure that bankruptcy will discharge (get rid of) enough bills to make it worthwhile.

For instance, nondischargeable debts, like domestic support arrearages and recent tax debt, won’t go away in bankruptcy. Also, student loans aren’t easy to wipe out because you’d have to win a separate lawsuit (however, in 2024, steps have been taken to ease the student loan discharge process with a new student loan bankruptcy form).

How Do I Qualify for Chapter 7 or Chapter 13 Bankruptcy in Michigan?

You won’t be surprised to learn that qualifying for bankruptcy involves meeting several requirements. Because you’re only entitled to a discharge every few years, if you’ve filed before, you’ll want to check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.

You’ll also need to meet specific chapter requirements. Here are the qualification basics for Chapters 7 and 13.

Chapter 7 Bankruptcy Qualifications

You’ll qualify for Chapter 7 bankruptcy if your family’s gross income is lower than the median income for the same size family in your state. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee’s website (select “Means Testing Information”).

Want an easy way to do this online? Use the Quick Median Income Test. If you make too much, you still might qualify after taking the second part of the “means test.” If, after subtracting expenses, you don’t have enough remaining to pay into a Chapter 13 plan, you’ll qualify for Chapter 7.

Chapter 13 Bankruptcy Qualifications

Qualifying for Chapter 13 can be expensive because the extra benefits come at a hefty price, and many people can’t afford the monthly payment. To qualify, you’ll pay the larger of:

• your priority nondischargeable debt
• the value of nonexempt property, or
• your disposable income.

How Do I Keep Property in Michigan Using Bankruptcy Exemptions?

You won’t lose everything in bankruptcy. You’ll use bankruptcy exemption laws to protect your property. We list the significant exemptions below, but first, understanding the following will help you maximize what you’ll keep in your case.

• Exempt and nonexempt property. You can keep property protected by an exemption or “exempt” property. When a bankruptcy exemption doesn’t cover the property, you’ll either lose it in Chapter 7 or have to pay for it in the Chapter 13 repayment plan.
• Choosing state or federal exemptions. You can choose whether you use the state exemption list or the list of federal bankruptcy exemptions, but you can’t mix and match exemptions from both sets. Filers who use state exemptions can also use the federal nonbankruptcy exemptions.
• Doubling exemptions. In many instances, spouses filing together can double the exemption amount if both own the property.
• Retirement accounts all filers can protect. Federal law allows all filers to keep tax-exempt retirement accounts, including 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, defined benefit plans, and traditional and Roth IRAs to $1,512,350 per person (for cases filed between April 1, 2022, and March 31, 2025). (11 U.S.C. 522(b)(3)(C); (n).) Learn more about retirement accounts in bankruptcy.

What Are the Bankruptcy Exemptions in Michigan?

Filers can protect some home and vehicle equity, personal possessions, retirement accounts, and more. Below is a list of commonly used Michigan bankruptcy exemptions.

Caution: The state exemptions have not been updated and should not be relied on, but used as a general guide only. Some state exemption amounts could be higher and your state could have changed the law by adding new or deleting old exemptions. You must verify exemption availability through independent research or by consulting with a local bankruptcy attorney.

Michigan Homestead Exemption

You’ll be able to protect up to $46,125 in equity in your residence. If you are over 65 or disabled, the limit increases to $69,200. Spouses filing together cannot double these amounts. (Mich. Comp. Laws §§ 600.5451(1)(m).)

Learn more about the homestead exemption in bankruptcy.

How Do I Use the Michigan Homestead Exemption?

Michigan lets filers use either the federal exemption system or Michigan’s state exemption system, so you’ll have two homestead amounts to choose between. A unique aspect of the Michigan homestead exemption is a surviving spouse of the owner can claim the homestead exemption.

The homestead exemption applies to your principal residence only. It could include your house, condominium, co-op unit, mobile home, motor home, boat or other watercraft, or manufactured home. The homestead exemption also applies to appurtenances to the property. If the property is outside a city, village, or recorded plat, the homestead can include up to 40 acres. If the property is inside a city, village, or recorded plat, the exemption applies to one lot or parcel.

If you hold property as tenancy by entirety with your spouse: If one spouse files for bankruptcy—not both—the bankruptcy trustee might be prevented from using the property equity to pay off debts. (Mich. Comp. Laws §§ 600.5451(1)(n),(o).) However, this is a tricky area of law. Because your home is likely your most valuable asset, consider consulting with a bankruptcy lawyer to ensure you can protect it in bankruptcy.

Michigan Motor Vehicle Exemption

Filers can protect up to $4,250 of equity in a motor vehicle. (Mich. Comp. Laws § 600.5451(1)(g).) Find out how the motor vehicle exemption works in a Chapter 7 case.

Michigan Pension and Retirement Account Exemptions

Most pension and retirement accounts are completely protected. Most individual retirement accounts and annuities, as well as ERISA-qualified pension, profit-sharing, and stock bonus plans, are fully protected except for amounts contributed within the 120 days before filing for bankruptcy. (Mich. Comp. Laws §§ 600.5451(1)(j)(k).)

Here are some specific protections:

• Firefighter and police officer benefits. (Mich. Comp. Laws §§ 38.559, 38.1683.)
• Legislative member retirement benefits. (Mich. Comp. Laws §§ 38.1057, 38.1683.)
• Public school employee retirement benefits. (Mich. Comp. Laws §§ 38.1346, 38.1683.)
• State police retirement benefits. (Mich. Comp. Laws §§ 38.1346, 38.1683.)
• State employees’ retirement benefits. (Mich. Comp. Laws § 38.1683.)
• Judges’ retirement benefits. (Mich. Comp. Laws §§ 38.2308, 38.1683.)

Michigan Personal Property Exemptions

• Burial grounds. (Mich. Comp. Laws § 128.112.)
• Milk or cream sales proceeds. (Mich. Comp. Laws § 600.4031.)
• Wages up to 60% of earned but unpaid wages for the head of household or $15 per week plus $2 per week for each dependent other than the spouse; others can protect up to 40% or $10 per week. (Mich. Comp. Laws § 600.5311.)
• Family pictures. (Mich. Comp. Laws § 600.5451(1)(a)(i).)
• Arms and accouterments required to be kept by law. (Mich. Comp. Laws § 600.5451(1)(a)(ii).)
• Clothing other than furs. (Mich. Comp. Laws § 600.5451(1)(a)(iii).)
• Family cemetery lot, tombs, and burial rights. (Mich. Comp. Laws § 600.5451(1)(a)(iv).)
• Professionally prescribed health aids. (Mich. Comp. Laws § 600.5451(1)(a)(v).)
• Six-month supply of provisions and fuel. (Mich. Comp. Laws § 600.5451(1)(b).)
• Household goods such as furniture, utensils, books, appliances, and jewelry valued at up to $4,625. ($700 per item limit) (Mich. Comp. Laws § 600.5451(1)(c).)
• Seat, pew, or slip to $800. (Mich. Comp. Laws § 600.5451(1)(d).)
• Farm animals, feed, and crops to $3,075. (Mich. Comp. Laws § 600.5451(1)(e).)
• Household pets to $800. (Mich. Comp. Laws § 600.5451(1)(f).)
• Computer and accessories to $800. (Mich. Comp. Laws § 600.5451(1)(h).)
• Tools, implements, materials, and other items necessary to carry on your profession, trade, occupation, or business to $3,075. (Mich. Comp. Laws § 600.5451(1)(i)).

Michigan Public Benefit Exemptions

• Crime victims’ compensation. (Mich. Comp. Laws § 18.362.)
• Veterans’ benefits. (Mich. Comp. Laws §§ 35.977, 35.1027.)
• Welfare benefits. (Mich. Comp. Laws § 400.63.)
• Worker’s compensation benefits. (Mich. Comp. Laws § 418.821.)
• Unemployment compensation. (Mich. Comp. Laws § 421.30.)

Michigan Insurance Exemptions

• Fraternal benefit society benefits. (Mich. Comp. Laws § 500.8181.)
• Insurance benefits fully protected regardless of the amount. (Mich. Comp. Laws § 500.2207.)
• Insurance benefits paid on behalf of an employer. (Mich. Comp. Laws § 500.2210.)
• Insurance benefits paid by any stock, mutual life, health, or casualty insurance. (Mich. Comp. Laws § 600.5451(1)(j).)

State exemption amounts are adjusted periodically and are not being updated in this article. You’ll find the Michigan exemption statutes on the Michigan Legislature website. Check for updates with the Michigan Department of Treasury in the Economic Reports section.

When Can I Use Michigan Bankruptcy Exemptions?

You can file for bankruptcy in Michigan after living there for over 180 days. However, you must live in Michigan for at least 730 days before filing. Otherwise, you’d use the previous state’s exemptions.

If you lived in multiple states during the two years before filing for bankruptcy, you’d use the exemptions of the state you lived in for most of the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)

How Do I Prevent Bankruptcy Exemption Problems in Michigan?

Exempt your property carefully. The bankruptcy trustee, the court-appointed official assigned to manage your case, will review the exemptions. A trustee who disagrees with your exemptions will likely try to resolve the issue informally. If unsuccessful, the trustee will file an objection with the bankruptcy court, and the judge will decide whether you can keep the property.

Example. Mason owns a rare, classic car worth $15,000, but the state vehicle exemption doesn’t cover it entirely. Believing that the car qualifies as art, at least in his mind, Mason exempts it using his state’s unlimited artwork exemption. The trustee disagrees with Mason’s characterization and files an objection with the court. The judge will likely decide the vehicle doesn’t qualify as art.

Purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

Should I Hire a Bankruptcy Lawyer in Michigan?

Most people find it worthwhile to get counsel. A bankruptcy attorney will help you:

• qualify for the chapter of your choice
• determine when it’s time to file
• help you keep the property you want
• make sure you don’t run afoul of fraud or other issues, and
• explain when you can stop paying the bills you’ll erase in your case.

You can expect creditors to call until you file. It’s usually best to ignore them because telling creditors about your bankruptcy can encourage them to take more drastic collection steps before losing the right to collect altogether. However, if you hire counsel and refer creditors to your lawyer, they’ll have to stop calling you.

How Do I File for Bankruptcy in Michigan Without a Lawyer?

You’ll complete the steps listed below in “What Steps Are Involved in a Michigan Bankruptcy?” But not everyone should file their own bankruptcy case.

The best candidate is a Chapter 7 debtor who meets qualification requirements, can eliminate all debts, and can protect all property with bankruptcy exemptions. People filing for Chapter 13 or Chapter 7 filers with complicated cases should seek representation.

Are you curious whether your case is simple enough to file yourself? Our quiz will help you identify potential complications while educating you about bankruptcy. You’ll find it here: Do I Need a Lawyer to File for Bankruptcy?

How Much Does It Cost to File for Bankruptcy in Michigan?

All filers pay a $338 filing fee in Chapter 7 unless the court grants a fee waiver and a $313 filing fee in Chapter 13 (amounts current as of August 2023). You’ll also pay approximately $50 to $75 for credit counseling and debt management courses.

If you hire a bankruptcy lawyer to represent you, you can expect to pay from $1,500 to $2,500 upfront for most Chapter 7 cases, although the price will depend on the going rates in your area and case complexity. Chapter 13 legal fees run about $1,000 to $1,500 more, but you can pay them in installments through the Chapter 13 payment plan.

Learn about your options if you can’t afford to hire a bankruptcy attorney. Call Firebaugh & Andrews for your free consultation. 734-722-2999

What Steps Are Involved in a Michigan Bankruptcy?

We all know that seeing the forest helps us recognize the trees. Similarly, understanding the significant steps you’ll take during your bankruptcy journey. will help you understand the bankruptcy process. Think of this checklist as a roadmap, but you can also use it to track your progress.

Bankruptcy Steps Checklist

 learn about Chapters 7 and 13

 check whether bankruptcy will erase debt

 find out if you can keep property

 determine whether you qualify

 consider hiring a bankruptcy lawyer

 stop paying qualifying debts

 gather necessary financial documents

 take a credit counseling course

 fill out and file paperwork

 turn over financial documents

 attend the 341 creditor’s meeting

 attend the confirmation hearing and make plan payments (Chapter 13 only)

 file a debtor’s education course certificate

 receive your debt discharge

What Do I Need to File for Bankruptcy in Michigan?

Once you decide to file, the fun begins! Well, not really. You’ll start by gathering your financial information, which can take time. But our bankruptcy document checklist should help you organize what you or your attorney will need.

Bankruptcy Document Checklist

Tax returns, unless you’re exempt:

 Two years for Chapter 7 bankruptcy (You’ll need both years to complete the paperwork and the most recent year for the bankruptcy trustee.)

 Four years for Chapter 13 bankruptcy

 Tax transcripts (Order transcripts from https://www.irs.gov/individuals/get-transcript if you don’t have copies of your returns)

Six months of the following:

 Proof of Income From Employer (paycheck stubs)

 Other Proof of Income (unemployment benefits stubs, proof of alimony or maintenance payments, income from any other source)

 Bank Statements (The bankruptcy trustee will want the most recent two months.)

 Investment and Retirement Statements (The bankruptcy trustee will want the most recent two months.)

Copies of the following (take original to court):

 Driver’s License, I.D. Card, Government I.D., or Passport (The name on the petition should match your identification exactly.)

 Social Security Card or proof of Social Security number

Things the trustee might ask for (current):

 Mortgage and Car Loan Statements (The trustee will check the balance owed.)

 Home Valuation (Realtor.com; Zillow)

 Car Valuation (Nada.com; Kelley Blue Book)

 Valuation of Antiques and Unusual Items (eBay)

 Photographs of Rare, Antique, and Collectable Items

 Photographs of Damaged Property

 Repair Estimates for Damaged Property

If you own a business, the trustee will likely want:

 Twelve monthly profit and loss statements

 Two yearly profit and loss statements

 Copies of any liability insurance policies

Things you’ll need to prepare your bankruptcy petition:

 Household Property List With Values (Group small items together, such as clothing, cookware, and bedding.)

 Credit Card and Other Billing Statements

 Credit Report (Get a free copy at annualcreditreport.com)

 Credit Counseling Completion Certificate

More things you might need at the creditors’ meeting:

 Bank statements showing the balance on the filing date (You’ll need to have exempted the entire balance.)

 Other Documents Reasonably Related to Your Financial Affairs

After the creditors’ meeting:

 Debtor’s Education Course Completion Certificate

Where Do I Find the Michigan Bankruptcy Court Websites and Locations?

Michigan has two bankruptcy districts—Eastern and Western. Each has multiple locations serving various geographical areas. Clicking on the district name will take you to the court homepage.

• Eastern District of Michigan
• Western District of Michigan

On the Michigan bankruptcy court website, you can access the district’s local rules and instructions for filing your paperwork on the navbar under “Filing Without an Attorney” or “For Debtors.”

What Happens After Filing for Bankruptcy in Michigan?

Your creditors will stop bothering you soon after you file. It takes a few days because the court mails your creditors notice of the “automatic stay” order that prevents most creditors from continuing to ask you to pay them. Here’s what will happen next:

• You’ll turn over financial documents proving the statements in your bankruptcy paperwork.
• You’ll attend the 341 meeting of creditors—the one appearance all filers must attend.
• You’ll complete a debtor education course and file the completion certificate.

These things must happen before you get a Chapter 7 bankruptcy discharge. Chapter 13 filers will also attend a repayment plan confirmation hearing and complete the three- to five-year payment plan.

Need More Bankruptcy Help?

Many people we speak with care about two things:

1. How fast they can get relief from their debt burden.
2. How much is costs to get out of their debt burden?

When comparing debt-relief options, Chapter 7 bankruptcy often wins in both categories over alternatives such a Chapter 13 bankruptcy, debt negotiation, debt management, and debt payoff planning. Let’s explore those variables in greater detail.

How Fast Do You Get Relief in A Chapter 7 Bankruptcy in Michigan

You can often get a Chapter 7 bankruptcy discharge in as little as 120 days in Michigan. That is the typical time it takes to complete a no-asset Chapter 7 case in Michigan. No-asset generally means that you do not own a home or other assets that may be above the Michigan bankruptcy exemptions.  

How Much Does It Cost To File Chapter 7 bankruptcy in Michigan

The Chapter 7 bankruptcy cost nationwide tends to be between $500 and $3000. That said, Chapter 7 bankruptcy cost in Michigan is different. 

The Chapter 7 bankruptcy cost may even be different if you are filing in Warren vs. Grand Rapids. For example, you may pay a Chapter 7 bankruptcy attorney fee of $1,090 in Warren, but pay a bankruptcy attorney fee of $1,170 in Detroit.

You should check the cost to file Chapter 7 bankruptcy in Michigan for specific information about the cost in your city.

Also, there are instances where the cost to file bankruptcy can be reduced based on a filing fee waiver. You should consider seeing the information related to Michigan filing fee waiver.

So, How Do I Qualify For Chapter 7 Bankruptcy in Michigan?

Chapter 7 bankruptcies are intended for people who cannot afford to pay any portion of their debts. However, you must first pass an income evaluation to qualify for a bankruptcy discharge (forgiveness of debt) in Chapter 7.

If you pass the Michigan bankruptcy means test (which you can estimate below), you can erase most unsecured debts through Chapter 7. Unsecured debts discharged in Chapter 7 include medical bills, personal loans, some old income tax debt, old utility bills, credit card debts, and most personal judgments. Unsecured creditors hold debts that are not secured by collateral. 

What about secured debts in Chapter 7?

If, however, you want to get rid of secured debts, like car loans and mortgages in Chapter 7, you need to surrender the asset to the creditor. The creditor must accept the asset as full payment of the amount owed. 

Let’s go into how you qualify for Chapter 7 bankruptcy.

IMPORTANT: Chapter 7 Qualification via Michigan Means Test

An important element in filing for bankruptcy relief is the Bankruptcy Means Test. The Means Test is a bankruptcy form that calculates your average monthly and annual income. The test compares your income against the median income of other households in Michigan.

If your average annual income or median income is below the Michigan median income, you may qualify for a bankruptcy discharge under Chapter 7. You can estimate whether you qualify for a Chapter 7 bankruptcy using the free Michigan Chapter 7 Bankruptcy Means Test Calculator below.

Help! My Income Exceeded The Chapter 7 Means Test Allowable in Michigan

If your median income is above the state median income, you may need to look at part 2 of the means test or at an alternative. 

The Means Test is a two-part test, so it is not a simple pass-fail test. If you “fail” the first section, you can “pass” the second section and still qualify under Chapter 7.  

You can learn more about passing the Chapter 7 means test when income exceeds the median.

Chapter 7 Bankruptcy Michigan Income Limits

The Michigan median income figures for the Means Test are adjusted periodically, based on IRS and Census Bureau data. Michigan median income for bankruptcy cases filed on or after April 1, 2022, is:

For Michigan households with more than 9 members, add $9,000 for each additional family member. You should always double-check the US Trustees website for the most current figures when calculating the Means Test.

Will I lose my belongings if I file Chapter 7 bankruptcy? Understand Michigan bankruptcy exemptions

Bankruptcy exemptions protect the equity in your property in a bankruptcy case. Likewise, property not protected by bankruptcy exemptions may be sold in a Chapter 7 liquidation case. Note also that for Chapter 13 cases, non-exempt equity in the property can increase the bankruptcy plan payment. 

The most important asset most people like to protect is their home. See the Michigan bankruptcy homestead exemption below.

The homestead exemption is often broken down by age and whether you are married. 

• Single and under 65: $40,475
• Single is 65 or older: $60,725
• Married and under 65: $40,475
• Married is 65 or older: $60,725

Michigan specific homestead bankruptcy exemption text: “Mich. Comp. Laws Ann. § 600.5451(n). $30,000 / $45,000 if 65+ or disabled. ; property cannot exceed 1 lot in town, village, city, or 40 acres elsewhere; spouse or children of deceased owner may claim homestead exemption.” (Source)

It is important to review additional Michigan bankruptcy exemptions and choose those exemptions that best protect your assets.

The federal bankruptcy exemptions are detailed in 11 U.S. Code §522. The National Consumer Law Center maintains a list of federal bankruptcy exemptions on its website. Michigan is a state that allows you to use federal bankruptcy exemptions

Always check that you use the most current information available when analyzing bankruptcy exemptions. 

Chapter 7 Bankruptcy Michigan Pros and Cons

Like any debt relief option, Chapter 7 bankruptcy in Michigan has pros and cons to consider. For example, you may own a home in Detroit with equity well above the exemption. In a Chapter 7 bankruptcy, you may be at risk of losing your home. Let’s cover the different pros and cons.

Pros

1. Often the least expensive debt relief options
2. Receive discharge in about 120 days
3. Potentially keep your home and belongings
4. Stop debt collection lawsuits
5. No more deficiences
6. It can relieve an unaffordable unsecured debt

Cons

1. Income requirements for qualification
2. Potentially lose your home and other belongings when above the exemption
3. Negative credit report impact for 10 years
4. Negative credit score impact (in some situations)
5. Non-dischargeable debt
6. Difficult to prevent foreclosure

Now that we’ve covered the pros and cons, let’s chat about the Chapter 7 bankruptcy alternatives in Michigan.

2) Alternatives to Chapter 7 Bankruptcy in Michigan

Let’s cover the Chapter 7 bankruptcy alternatives in Michigan in case you do not qualify for Chapter 7 bankruptcy, have too many assets, or do not wish to pursue Chapter 7 bankruptcy.

a) Chapter 13 Bankruptcy in Michigan

For those who make above the income limit for Chapter 7, debt relief can still come through a filing a Chapter 13 bankruptcy. A Chapter 13 Bankruptcy in Michigan case allows you to restructure your debts into an affordable monthly plan. By restructuring debts, many people can afford to keep their homes and vehicles under Chapter 13.

Chapter 13 stops foreclosures, repossessions, and potentially stops Michigan wage garnishments. Chapter 13 bankruptcy also allows you to pay back mortgage payments, past-due car payments, and tax debt over three to five years through a bankruptcy plan. In addition, Michigan may also allow you to reduce unpaid child support and alimony. However, you must resume your normal domestic support payments to remain in Chapter 13.

In a Chapter 13 plan, some debtors (the person filing the bankruptcy case) can lower their car loan payments and erase second mortgages, if they meet certain requirements. 

Can you afford Chapter 13 bankruptcy?

Let’s say you do not qualify for a Michigan Chapter 7 bankruptcy and are wondering whether you should pursue a Chapter 13 bankruptcy. Can you afford it? It may be odd to ask whether you can afford bankruptcy, but it’s an important question to ask.

b) Debt Relief

MI debt relief can be less expensive than both Debt Management and Debt Payoff Planning because the debt management company is negotiating a lower amount on your total debt. We covered the pricing estimate differences in our article covering debt management vs debt settlement.

You should consider the following if you are pursuing debt settlement: Credit score impact, debt settlement pros and cons, and avoiding Debt Settlement companies with red flags.

c) Michigan Debt Management

Debt settlement companies negotiate lower amounts. Debt management companies negotiate lower interest rates. This is the key distinction. Often these programs last 3 or 5 years. This option is often more expensive than debt settlement and some creditors such as personal loan lenders may not work with the debt management company. There may be debt management credit score implications as well.

Who may debt management in Michigan best for? Debt management may be best for those that have all high-interest credit card debt, and a reduction from 22-30% interest rate to a 10% interest rate would continue to make the debt affordable.

d) Michigan Debt Payoff Planning

You may be able to get out of debt through debt payoff planning, which is often a combination of trying to reduce expenses and putting extra cash into specific debts to avoid interest. You may not be able to do this because of the size of the financial hardship, but if you are interested, we build the Savvy debt payoff planner to help prioritize your debts. The app saves about $2,000 in interest on average by using the savvy debt payoff method instead of the snowball debt payoff method.

3) Specific Michigan Chapter 7 Bankruptcy Information:

Let’s say you went through the 2 steps above and are now considering whether Chapter 7 bankruptcy is the right choice for you. Let’s go through some attributes about filing Chapter 7 bankruptcy in Michigan that would be helpful to consider.

Michigan Chapter 7 Bankruptcy Credit Counseling and Debtor Education Courses

When you file for bankruptcy relief under Chapter 7 bankruptcy, you must complete two bankruptcy courses to receive a bankruptcy discharge. This includes a credit counseling course prior to filing a bankruptcy case, and a debtor education course after filing. See below the approved courses for Michigan

• Credit Counseling Approved Courses
• Debtor Education Approved Courses

The United States Trustee’s office has approved state-specific companies that offer bankruptcy courses. You can access a list of companies in Michigan offering bankruptcy courses on the UST website. Both courses are available online for a small fee.

Michigan Chapter 7 bankruptcy Court Locations

Many 341 meetings of creditors have been over the phone or over Zoom due to the pandemic. That said, you may want to see where the courthouse is in Michigan if there are any meetings that need to take place in person. Below are the court locations for filing bankruptcy based on the bankruptcy district.

Eastern District

• Theodore Levin U.S. Courthouse
  
  231 W. Lafayette Blvd.
  
  Detroit, MI 48226
• Federal Building
  
  200 E. Liberty Street
  
  Ann Arbor, MI 48104
• United States Post Office Building
  
  1000 Washington Ave.
  
  Bay City, MI 48708
• Federal Building and U.S Courthouse
  
  600 Church Street
  
  Flint, MI 48502
• Federal Building and United States Courthouse
  
  526 Water Street
  
  Port Huron, MI 48060

Western

• 399 Federal Bldg
  110 Michigan St NW
  Grand Rapids MI 49503
• 113 Federal Bldg
  315 W Allegan St
  Lansing MI 48933
• 107 Federal Bldg
  410 W Michigan Ave
  Kalamazoo MI 49007
• 330 Federal Bldg
  202 W Washington St
  PO Box 698
  Marquette MI 49855

Chapter 7 Bankruptcy Trustees Michigan

Below are the Chapter 7 bankruptcy trustees in Michigan broken out by bankruptcy district. You can also find the list here. 

In addition to the above, review Michigan local bankruptcy rules before filing a bankruptcy case. Some local rules may differ slightly from the Federal Bankruptcy Rules.

Conclusion

Hopefully, now you know much more about Chapter 7 bankruptcy in Michigan. Call us for a free consultation 734-722-2999

Keep in mind that the very best time to deal with debt is the first moment you realize it is out of control. That’s when you will have the most options available to solve the problem. However, most people delay getting help for their debt, hoping that things will turn around. For some, when they do finally get help, their solutions are largely limited to declaring Bankruptcy. At that point, is there a best time to file your Bankruptcy? In some circumstances, the answer is “Yes!”

Bankruptcies don’t ever go “on sale”, nor will you ever find a coupon code for a discount, but there is a certain time of year, where it won’t cost you as much. I don’t recommend waiting months to deal with your debt, but if you are looking at your debt late in the calendar year, timing can be critical.

When you file an Assignment in Bankruptcy you are signing over everything that you own, have a right to or an interest in (except exempt assets) to the Trustee for the benefit of your unsecured creditors. A big part of the income for your creditors in a Bankruptcy estate can come from income tax refunds.

Bankruptcy and Current Year Tax

When you file for Bankruptcy, your Trustee will be filing any outstanding income tax returns for you as well as the income tax returns for the year of Bankruptcy. The return for the year of Bankruptcy is broken up into two pieces, a pre-bankruptcy tax return, and a post-bankruptcy tax return. There are two purposes for this. The first is to make sure that any tax you owe, gets included, and discharged, in the Bankruptcy. The second purpose is so that any tax refunds owing to you can go to your creditors.

The pre-bankruptcy tax return covers the period beginning January 1^st and ends on the date of Bankruptcy. Should there be a refund from this return, it will come to the Trustee for your creditors (if there is an outstanding debt owing to CRA, CRA may keep this refund). If there is anything owing to CRA on the pre-bankruptcy tax return, it will be included with your debts in the Bankruptcy.

The second return for the year of Bankruptcy is called the post-bankruptcy tax return. This return covers the period beginning at the date of Bankruptcy and ends December 31^st of the year of Bankruptcy. This return will also be filed by your Trustee and is filed at regular tax time. With the post-bankruptcy tax return, if there is a refund it will come to the Trustee for your creditors. If you owe taxes on this second return, it will be your responsibility to arrange for payment because it is a new, post-bankruptcy debt.

Bankruptcy and Prior Year Tax Returns

If your income tax return for the year prior to filing the Assignment in Bankruptcy is also outstanding, your Trustee will file that return as well. This return is like the pre-bankruptcy tax return in that, should there be a refund, it will be sent to your Trustee for your creditors.  If you owe on the prior year tax return, that debt will be included with the other debts listed in your bankruptcy.

This is where the timing of your Bankruptcy can become important.

If you are considering filing an Assignment in Bankruptcy in December 2022, your Trustee will file the two returns for the year of Bankruptcy and any refunds will come to the Trustee for your creditors. If you wait until January 1^st, 2023, to file the Bankruptcy, the Trustee will file the return for the year prior (2022), and the two returns for the year of Bankruptcy (2023). Any refunds from those three returns will be sent to the Trustee for the creditors. Also, any tax credits for the year of Bankruptcy will also be affected.

Tax and the Self-Employed

If you are self-employed, timing is also important. As previously mentioned, if you owe on the post-bankruptcy tax return, you will be responsible for paying the amount owing as it is a new, post-bankruptcy debt. When you are self-employed, you generally have amounts owing at the end of the year, because you have not had tax taken off at source. If you were to file an Assignment in Bankruptcy on December 31^st, you would not have earned any income in the post period, as such all amounts owing would fall in the pre-bankruptcy tax return and be included with your Bankruptcy debts.

Seasonal Workers

There can be other factors besides income tax and tax credits that can determine the best time of year to file an Assignment in Bankruptcy. For example, the length of time one is in Bankruptcy can be impacted by the amount of money earned each month. This could apply to you, for example, if you are a seasonal worker who applies for Employment Insurance at certain times of the year. If this is the case, you may want to explore your options with a Licensed Insolvency Trustee, since your income varies significantly depending on the time of year.

Regardless, if you feel that your debt load is not manageable, generally the ideal time to file is right now!  There is something to be said for dealing with the issue now, as opposed to struggling on, waiting for the optimal time.

Call us for your free consultation. 734-722-2999

Filing for Chapter 7 bankruptcy gives you a fresh start by discharging (wiping out) many types of debts. With a few exceptions, you can get rid of qualifying “pre-petition” debts incurred before filing for bankruptcy. However, you can’t discharge “pre-petition” debts incurred after your bankruptcy filing date.

In most instances, it’s easy to identify debts incurred before versus after the bankruptcy filing date. But not always. Keep reading to learn about some of the trickier debts you might encounter.

Which Debts Can You Discharge in Chapter 7 Bankruptcy?

Most debts, such as medical bills, credit cards, and payday loans, can be discharged in a Chapter 7 bankruptcy. However, this is not true for all obligations. You can’t discharge some debts like child support, student loans, recent tax debt, and fines or penalties for violations of the law. Chapter 7 also doesn’t discharge post-petition debts. So if you incur a new debt after filing for bankruptcy, you’ll be on the hook for it after you receive your bankruptcy discharge.

Pre-Petition v. Post-Petition Debts in Chapter 7 Bankruptcy

When determining whether a debt is a pre-petition or post-petition debt, you’ll start by looking at the date you filed your bankruptcy petition. If you had the debt before the date of your bankruptcy filing, the debt is a pre-petition debt. If you took out a loan or incurred some other debt after filing for bankruptcy, it will be a post-petition debt. For instance, if you use a credit card before filing for bankruptcy, the debt is a pre-petition debt. Utility and phone charges incurred before the bankruptcy filing date are also pre-petition debts, but utility and phone charges incurred after the bankruptcy filing date are post-petition debts.

Car Loans, Mortgages, and Installment Debts in Chapter 7 Bankruptcy

Many kinds of debt require monthly payments that you must continue to pay throughout your bankruptcy if you want to keep the property. For instance, car loans or mortgages are debts that are guaranteed (secured) by the property purchased. If you don’t pay, the lender can take the property.

If you incurred the monthly obligations on these debts before you filed for bankruptcy, they are pre-petition debts. The bankruptcy will discharge your liability to pay. But the bankruptcy discharge will not eliminate the lien you gave the lender allowing the lender to reclaim the property if you stop making payments. So if you fall behind, the creditor has the right to repossess or foreclose the property, even after you receive your discharge. To keep the property, you must keep up with the payments.

You can learn more about secured debt in Chapter 7 bankruptcy by reading Understanding Secured, Unsecured, and Priority Debts in Bankruptcy.

Homeowner’s and Condominium Association Fees in Chapter 7 Bankruptcy

Whether your bankruptcy will discharge HOA or COA dues and assessments (collectively called assessments) will also depend on when you incurred them. But there’s a twist. Relinquishing the property in the bankruptcy case won’t automatically stop your responsibility to pay.

Pre-petition assessments. You can discharge your liability for HOA or COA assessments if they became due before filing your bankruptcy petition.

Post-petition assessments. You’ll remain personally liable for any dues or assessments that become due after filing the petition, even if you end up giving up your condo, townhome, or home as part of your bankruptcy case. You’ll remain responsible as long as you remain on title as the owner. Because of this, some people wait to file for bankruptcy until after a lender repossesses the property.

Reaffirming a Debt in Chapter 7 Bankruptcy

Sometimes after you file a Chapter 7 bankruptcy, a creditor will want you to reaffirm the debt. When you reaffirm a debt, you enter into a new contract with the creditor. Reaffirmation agreements commonly occur when you’ve financed a car that you’d like to keep after your bankruptcy case.

Because you are creating a new contract and a new obligation to pay after filing your bankruptcy case, reaffirmed debts are post-petition debts. Your bankruptcy will not discharge your responsibility to pay these debts after your bankruptcy is over. If you fail to make payments, the creditor has the right to sue you for the money you owe and repossess or foreclose on the property.

Assuming a Lease in Chapter 7 Bankruptcy

A lease agreement signed before you filed a Chapter 7 bankruptcy is a pre-petition debt that can be discharge in bankruptcy. But if you assume the lease by entering into a new contract, and then fail to make payments, you’ll likely be responsible for the payments due after you signed a new agreement. If you simply continue making lease payments without entering into a new agreement, you might not be responsible for any payments you fail to make after you receive your bankruptcy discharge, however. Check with a local bankruptcy attorney to determine the approach used by your local court.