Michigan residents who find themselves overwhelmed with debt can seek relief under the federal bankruptcy laws. There are two common forms of bankruptcy for individuals: Under Chapter 7, the courts sell off all non-exempt assets to pay off as much of your debt as possible and under Chapter 13, you keep all or most of your assets but must create a court-approved plan to pay off your debts over time. Although bankruptcy is handled in the federal courts, some of the details vary based on your being a Michigan resident.
District Bankruptcy Courts in Michigan
Michigan's bankruptcy court is divided into the Eastern District, with the main court in Detroit, and the Western District, with the main court in Grand Rapids. Each district also has divisional offices where you may file so long as you file in the district where you live.
Can I File Chapter 7 Bankruptcy?
You may file Chapter 7 bankruptcy if your average monthly income for the six months before you file is less than Michigan's median income for a family of your size. For example, if you are married with two children, you must earn less than Michigan's median income for a family of four, which is $6,037 monthly for 2012. If you make more than this, you must pass a stringent means test to qualify for Chapter 7.
How Long Is a Chapter 13 Repayment Plan?
The amount of time you must spend paying your creditors also depends on your income as compared to Michigan's median income. For example, if you make less than the median income, your repayment plan will usually be up to three years. If your income matches or exceeds the state median, your plan will be five years, unless you're able to pay off all unsecured debt in less time.
Can I Keep My House and Car?
Both federal and state laws allow you to exclude certain personal property from your bankruptcy case. Michigan lets you choose whether to use the state or the federal exemptions, but you must pick one or the other, you cannot mix and match from both lists.
The federal and state lists include similar exemptions, although specific items and values vary. Some of these exemptions include:
- Personal items such as family pictures, clothing, jewelry, and household goods
- Public benefits
- Retirement accounts
- Tools of your trade
Exemption values for your home and car also differ. Michigan adjusts the dollar value of exemptions every three years. As of 2011, the state allows a homestead exemption up to $35,300 of equity or $52,925 for people aged 65 or older or disabled. The federal exemption is $21,625 or $43,250 for married couples filing jointly. The state allows you to keep up to $3,250 of equity in one vehicle, while the federal vehicle exemption is $3,450.
If you have moved to Michigan within two years prior to filing for bankruptcy, you must use the exemptions from your previous home state.
Information Is Not Advice
This article provides a general overview of bankruptcy in Michigan, but it is not legal advice. You should contact a Michigan bankruptcy attorney for specific information related to your unique situation.