Bankruptcy Laws In Michigan

Filing bankruptcy in Michigan is an option a person can choose if they need relief from their debt problems and to give themselves a fresh start in life. However, it must be pointed out that a decision to file for bankruptcy should not be taken lightly as it can have a long lasting impact on a persons credit score. It should only be considered when all other the debt relief alternatives have been used. Before proceeding you a person should gain as much knowledge about the procedures and bankruptcy laws in Michigan.

For an individual there are 2 types of bankruptcies that you can choose from. They are chapter 7 and chapter 13 bankruptcy. For business there is chapter 11 bankruptcy. Each chapter will provide debt relief through a discharge however, they achieve this in different ways. You need to consult with an experienced Michigan bankruptcy attorney who can help you decide which is the most suitable chapter based on your circumstances.

Chapter 7 Bankruptcy Laws In Michigan

This is considered the most common way for people to reach a solution to their debt problem. Chapter 7 is also known as a 'straight' or 'liquidation' bankruptcy. Its aim is to discharge all debts for those people who have little to no assets or do not have the cash to pay off their creditors.

Key Points  There are 2 types of personal bankruptcy Exempt property is protected from creditors In Michigan you can apply either Federal or state exmptions Exemption laws can differ between states

To be eligible for chapter 7 bankruptcy  the person needs to be in serious financial hardship. This can be as a result of being losing their job through ill health or going through a divorce settlement.  To be eligible for chapter 7 you will need to pass an evaluation means test. The test will determine if you have enough disposal household income to pay all or some of your debts. If you do not pass the test you can still apply for chapter 13.

Bankruptcy Laws In Michigan Chapter 13

Michigan chapter 13 bankruptcy is actually is similar to a debt repayment plan. It is suitable for those people who have a lot of assets that they do not wish to lose for example, lose their home through foreclosure. The agreed repayment plan will outline the debts you have to pay back. Depending on your financial situation this could be all or a proportion of your debts that you need to repay. The period to repay can last between 3 to 5 years depending on the circumstances.

Michigan Bankruptcy Exemptions

The bankruptcy law and process throughout the country is the same between each state however, it can differ when it comes to property exemptions. Exempt property are assets that you can keep or protect from being sold to pay off your creditors. Properties, can refer to your home, car, personal belongings, pensions, insurance, tools of trade and salaries.

In most cases exemption limits are applied to the property you can exempt. These limits are applied to the equity within the property. Equity refers to the difference between the market value of the property and the amount of debt still owed on it.

For example, a car worth $6000 that has a loan of $3500 has an equity amount of $2500. If the states exemption limit is above $2500 the person can keep the car.  If the equity amount is not covered or does not exceed the exemption limit then, the bankruptcy trustee can elect to have the asset sold and proceeds distributed among each of the creditors.

There are federal exemptions and there are exemptions that can be applied by the state of Michigan. You can apply for one or the other. To determine whether the federal or the states exemptions are best suited to your situation you should consult with a local bankruptcy lawyer.

The following is a limited list of exemptions compiled from the Michigan bankruptcy code:

Homestead Exemption

This refers to your house or place of residence and can also include a condominium. The exemption limit is up to $35,300. If you are over 65 or have a disability the limit can rise to $52,925. The spouse or child of a deceased property owner have the right to claim this exemption.

There are certain restrictions applied to the homestead exemption. The property must not exceed more than one lot in a municipality or 40 acres in size.

Personal Property

This can include household goods, electrical appliances, home furniture, clothing and books up to a limit of $350 per item or $3,525 combined.

Motor car up to $3250

Computers including peripherals up to $600

Building including loan association shares up to $1000, in lieu of the homestead exemption.

6 months worth of fuel and food for head of the household.

Animals including feed an exemption of $2,350.

Public Benefits

Crime victim’s compensation

Social welfare benefits

Unemployment compensation

Veterans’ benefits for WWII veterans

Veteran’s benefits for Korean War veterans

Veteran’s benefits for Vietnam veterans

Worker’s compensation

Tools of trade

Arms & accoutrements you’re required to keep

Tools, implements, materials, stock, apparatus, team, motor vehicle, horse & harness to $1000 total

Wages/Salaries

60% of earned but unpaid wages for head of household; else 40$; head of household may keep at least $15 per week plus $2 per week per non-spouse dependent; other may keep at least $10 per week.

In Michigan there are no wild card exemptions.

These are most but all the state exemptions under the Michigan bankruptcy laws. For more details contact local bankruptcy law firms who handle personal bankruptcy cases. Alternatively, you check the online resource www.legalconsumer.com which updates the exemptions rules on regular basis.

The federal bankruptcy process enables individuals to represent themselves without a lawyer however, this is not recommend. The laws especially in regards to exemptions can be complex and change quite often. An uneducated person who is not fully versed in the bankruptcy process and the courts procedures can end up losing assets and properties that they do not need to. In this regard the knowledge and legal experience of a lawyer has the potential to save a debtor a substantial amount of money and emotional heartache.

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