Filing Bankruptcy in Michigan: an Overview
Michigan bankruptcy courts are divided into two districts: the Eastern District and the Western District. The Eastern District of Michigan bankruptcy court is further divided into divisions. Bay City, Detroit and Flint all have a bankruptcy court to serve local debtors. Similarly, on the west side of the state, Grand Rapids and Marquette both house bankruptcy courts. The city that you live in will determine the location of your meeting of creditors as well as the bankruptcy court that will hear any issues that may arise in your case.
Filing Chapter 7 Bankruptcy
Chapter 7 bankruptcy or “straight bankruptcy” is a process designed to help consumers start over financially. Chapter 7 discharges unsecured debts such as high-interest credit cards and medical bills. Although the process is organized under federal law, the chapter 7 process varies by jurisdiction. Each state, as well as the federal government, has enacted exemption laws which dictate the amount of property a debtor can keep through the bankruptcy process. In most cases, exemption laws protect all of the assets of the debtor; allowing them to file for bankruptcy and keep all of their property.
Michigan bankruptcy exemptions
In Michigan, debtors can choose between the state or federal exemptions. Generally speaking, most debtors will elect to utilize Michigan bankruptcy laws because they allow more property to be protected. Under the Michigan exemption system, each homeowner and his or her dependents may exempt up to $35,300 of his or her interest in his or her home or other property covered by the homestead exemption. If the homeowner is age 65 or older or is disabled, the exemption amount is $52,925. Married couples are not permitted to double the homestead exemption. Michigan also allows debtors to protect up to $3,250 of equity in a car. For a complete list of Michigan’s updated bankruptcy exemptions, visit www.legalconsumer.com. It should also be noted that on February 24, 2011, the Sixth Circuit Bankruptcy Appellate Panel found Michigan’s bankruptcy only exemptions to be unconstitutional. There is a state of flux within the law, making it all the more important to consult an attorney if you’re considering filing for bankruptcy.
Do I qualify for Chapter 7 in Michigan?
In addition to unique exemption laws, each state has different income guidelines for determining whether the debtor is eligible to file for Chapter 7. thanks to bankruptcy reform in 2005, debtors seeking to file Chapter 7 bankruptcy must demonstrate that they do not have enough disposable income to pay something back to their creditors. If your income over the last 6 months is below the median in your state, you will automatically be eligible to file chapter 7. If, on the other hand, your income is greater than the state median over the last 6 months for a household of your size, you will need to subject your monthly expenses to the means test. The means test is a formula that calculates disposable income. If you have too much spoils going come left over at the end of the month, there is a presumption that you should be filing for Chapter 13 instead of chapter 7 bankruptcy. To view the current median income for Michigan households take a look at this chart supplied by the Census Bureau. Remember, that the median income figures that apply to you are based on the size of your household.
Will I be able to afford bankruptcy?
Michigan’s economy has been among the hardest hit in the country and even those facing severe financial distress are often concerned that they won’t be able to afford a bankruptcy attorney. While the cost of bankruptcy can be high, especially for families who are struggling to get by, most bankruptcy law firms offer flexible payment options for their clients. To file Chapter 7 bankruptcy in Michigan, the average attorney fee in the Detroit area is approximately $900.-$1,100. this won’t include the filing fee which was recently raised to $306. The cost to file Chapter 13 bankruptcy is higher then chapter 7, but attorneys are often willing to accept payment of their fee through the chapter 13 plan. According to Detroit bankruptcy attorney Pat Wilson, chapter 13 fees vary by complexity, but start at around $2500. The filing fee for chapter 13 bankruptcy is $274, this is uniform nationwide. If you find yourself struggling with debt and are curious about what bankruptcy may be able to do for your finances, contact an attorney. Most offer free consultations and will work with you to make the process affordable.