When you are facing so much personal debt that you cannot realistically repay it all on your own, filing for bankruptcy can be the best solution for you. Bankruptcy is a tool that enables you to have most or even all of your personal debt discharged by working with the court and the court-appointed trustee who manages your case.
Filing for Bankruptcy in Michigan
Once you have decided to file for bankruptcy, you need to determine whether Chapter 7 or Chapter 13 bankruptcy is the right choice for you. A bankruptcy lawyer can help you make this determination. You might not even have a choice; if you do not pass the Michigan means test, your only option is Chapter 13.
After you have determined which chapter to file and the repercussions of bankruptcy, filing for bankruptcy in Michigan starts with filling out the necessary forms for your chapter. You can download these forms from the United States court’s website or from your local bankruptcy court. Next, you must submit these forms to the court, at which point you are assigned a bankruptcy trustee. His job is to ensure that your creditors are repaid.
Once you are assigned a bankruptcy trustee, you must receive mandatory credit counseling. Your trustee then schedules a 341 meeting, a formal meeting between your creditors, during which they may ask questions about your assets and debts. Then, depending on whether you filed for Chapter 7 or Chapter 13, your nonexempt assets may be liquidated in order to repay your debts, or you may draft and submit a repayment plan to the court.
The Michigan Means Test
In order to file for Chapter 7 bankruptcy in Michigan, you must pass the means test. The Michigan means test is comprised of the same criteria as the means test in every other state. This criteria is that an individual must earn less than the median annual income for a household of her size or that she prove that she does not have sufficient disposable income to file for Chapter 13 bankruptcy. To automatically pass the Michigan means test, a single individual must earn less than $48,626 per year. This figure scales with the number of people in the filer’s household.
Chapter 13 and Chapter 7 Bankruptcy in Michigan
Aside from the means test, there are a few other differences between Chapter 13 and Chapter 7 bankruptcy in Michigan. One is how long the bankruptcy stays on your credit report after your case is closed. Chapter 7 remains on your credit report for 10 years and Chapter 13 stays for seven years.
The primary difference between the two is how your debts are repaid. With Chapter 7 bankruptcy, your trustee organizes a liquidation of all your non-exempt assets, then uses the profit to repay your creditors. Non-exempt assets include recreational items, hobby items beyond those you use for work, and clothing other than that deemed necessary for day-to-day living. With Chapter 13, you must have a repayment plan approved and once it is approved, you work closely with the court to repay your debts accordingly over three to five years.
Filing for bankruptcy in Michigan is not an easy process. But it can be your best choice for having your personal debt discharged and enabling you to take control of your finances.