What You Need to Know About Chapter 7 Bankruptcy in Michigan
Filing for chapter 7 bankruptcy is often the first choice for people who are unable to pay their debts. It’s a quicker and easier process than chapter 13, which we’ve previously written about on our blog and typically involves a 3- to 5-year repayment plan for the debtor. Michigan bankruptcy attorney James L. Gutting has helped countless Michigan residents navigate either process, but you may not yet know which one is best for you given your personal circumstances.
Given that there are certain differences in qualifications between states, you may or may not be eligible for chapter 7 bankruptcy in Michigan. In this post, we’ll cover how the process generally works and how it’s different when you file in Michigan.
Chapter 7 Eligibility in Michigan
The main eligibility requirements for a chapter 7 filing are related to whether you’ve previously filed for chapter 7 or 13, whether the court believes you’re attempting to defraud your creditors, and whether you’re willing and able to attend a credit counseling court from an approved credit counseling agency within 180 days ahead of filing.
The requirement that differs most from state to state is your income compared to your state’s median income. It must be lower than the median income of a household of the same size in your state.
The median household income in Michigan is $57,144, while the median individual income is $29,672. Of course, if your household size is any larger or smaller than the average numbers referred to here, your requirements may vary.
There are also differences in the chapter 7 filing process even if you do qualify, mainly with regard to property exemption rules. Each state has its own guidelines for which types of property may be considered exempt and may not be.
Michigan allows you to choose between their state exemptions or federal exemptions. You can find a detailed list of typical exemptions permitted in Michigan in this Nolo article.
The Chapter 7 Bankruptcy Process
When you file for chapter 7 bankruptcy, you’ll generally have to file several forms related to your property, your income, your expenses, and your debts. With property specifically, you’ll need to include information about property you’ve owned and spent money on within the past two years, property you sold or gave away within the past two years, and property you believe to be exempt from confiscation through the chapter 7 bankruptcy process.
From this point, an “automatic stay” is placed on your debts to stop creditors from collecting what you owe them. A bankruptcy trustee is also appointed by the state’s bankruptcy court and granted control over your property. Their job is to ensure that as much of your debts to your creditors are paid as possible with your assets.
A “creditors meeting” will also take place in which you and the creditors you’ve listed will briefly appear in court to answer questions about your bankruptcy and the information you’ve filed.
From there, once all non-exempt assets have been used to cover your debts, all of your debts will be discharged. The only exceptions to this are:
- Child support
- Tax debts
- Student loans
- Debts declared nondischargeable by the court
Of course, this is all under the assumption that you qualify for chapter 7 in the first place. As mentioned before, certain eligibility requirements and parts of the process will vary from state to state.
Navigating the Bankruptcy Process
The process of filing for chapter 7 bankruptcy can be a complicated one with many details to juggle. It’s especially important to be extremely diligent given that your property and assets are at risk.
Michigan bankruptcy attorney James L. Gutting has already helped many people navigate this process and hold onto property which they otherwise might have lost. If you’re filing for chapter 7 bankruptcy in Michigan, book an appointment with him to learn more about how he can help.
