Filing Chapter 7 Bankruptcy In Michigan
Chapter 7 Bankruptcy is a liquidation or straight bankruptcy. A trustee is appointed by the bankruptcy court to take your property and sell it and use the money from the sale to pay your debt obligations. Most unsecured qualifying debt can be discharged with in four to six months. There will be some types of debt that will not be discharged by filing Chapter 7 Bankruptcy.
If you are considering Chapter 7 Bankruptcy, it is important to talk to a Michigan Bankruptcy Lawyer. A bankruptcy attorney will determine if you qualify for Chapter 7 Bankruptcy. If you do, your attorney can file the bankruptcy petition, schedules and the Statement of Financial Affairs which will list all of your debts, creditors, property, assets and expenses. After the petition is filed, debt collection will be halted under an automatic stay. Under Chapter 7 Bankruptcy protection, the automatic stay may be temporary. Chapter 7 Bankruptcy is the most popular, least expensive and easiest form of personal bankruptcy.
With the passage of the Bankruptcy Abuse Prevention and Consumer Act (BAPCPA) in 2005, it became more difficult to file Chapter 7 Bankruptcy. The goal of the BAPCPA was to require more individuals to file Chapter 13 Bankruptcy and pay back part or all of their debts. The BAPCPA made several changes to the federal bankruptcy laws including:
- You must complete a credit counseling course prior to filing bankruptcy
- You must complete a financial management course prior to the discharge of your debts
- You must pass an income test to be able to file Chapter 7 Bankruptcy
The goal of the income test is to determine how much disposable income your family has and is it enough to repay your creditors. The test compares your income to other Michigan residents. If your income is higher, you have to pass additional “means tests” and you may have to file Chapter 13 Bankruptcy. If it is lower, you probably can file Chapter 7 Bankruptcy.
The means tests will subtract pre-determined expenses (house payment, car payment, limited school expenses, taxes owed and child support) from your gross income and determine if you can pay $6,000 ($100/month) over the next 60 months to your creditors. If you can do this, you may not qualify for Chapter 7 bankruptcy. If you can not do this, but you could pay 25% of your disposable income in debt payments over the next 60 months, you may not qualify for Chapter 7 Bankruptcy.
Incomes for all states are published under the State Median Income List by the United States Trustee program. For the state of Michigan, after March 15, 2009, the average median income for a single wage earner is $44,703. For a family of two the median income is $53,575 and for a family of three it is $63,339. For a family of four it is $76,312.
The means test information provided is general in nature and should not be considered legal advice. It is important to contact a Michigan Bankruptcy Lawyer if you are considering filing Chapter 7 Bankruptcy.
