Michigan Bankruptcy
Michigan Bankruptcy Law
Bankruptcy Code and Exemptions...
Although Federal Bankruptcy Code and U.S. Bankruptcy Laws apply to everyone, each state has its own Bankruptcy Code and Rules of Bankruptcy Property Exemption that apply specifically in that state.
New Michigan Bankruptcy Law Reform
The state of Michigan enacts comprehensive legislative reforms each year, but these changes have not affected debtors rights in bankruptcy to such a great extent as the recent Federal Bankruptcy Code reform laws. The Federal Code provides the framework in which Michigan and all other state bankruptcy laws apply. Michigan rights to property and the determination of the validity of claims is a central focus of all cases.
The federal reform preemptions negated qualification for Chapter 7 in three new ways.
- Disposable income
- Comparative income
- Total debts owed
Any one of the above may exclude Michigan residents from filing Chapter 7. Previously, qualification for Chapter 7 had been rather simple and almost any Michigan resident desiring discharge could file.
The new disposable income test compares means to the Michigan median income. Any Michigan resident earning more than the published Michigan median income must file Chapter 13, and propose a plan of repayment over a period of time not less than 5 years. In practice, these 5 year plans require payments to the trustee each month until all debts are paid in full, or 5 years, at which time the remaining balances are discharged.
While the plan is pending, all disposable income must be paid to the trustee, according to a new National Standards Schedule of allowable expenses. These expenses are considered low compared to traditional Chapter 13 payments, yet with the assistance of legal counsel, many debtors are finding new ways to exploit loopholes left by over zealous laws designed to punish innocent victims.
Michigan Bankruptcy Exemptions
Medical bankruptcy cases present a particularly challenging problem for the residence of Michigan. When claiming the Michigan bankruptcy exemptions, statutory liens may attach which defeat individual exemptions. Residents of Michigan do not necessarily receive notice of liens when attaching, yet nevertheless these liens are legally enforceable just as a lien on a car.
For example, following an automobile accident and serious injury, emergency response personnel respond automatically. Medical treatment is provided without regard to insurance coverage. Later, if medical expenses remain unpaid, hospitals may file a statutory lien against all claims against third parties who may be liable for the accident. The result creates a lien upon personal injury cases that must be paid before disbursing any funds to the injured party.
When filing bankruptcy and claiming the Michigan bankruptcy exemption based on necessity for support, the personal injury claim may nevertheless be lost because the bankruptcy court must enforce all valid liens against exempt property.
Homestead Property that Remains in Doubt...
When a debtor owns multiple tracts of real estate, especially a second home, the enforceability of the Michigan homestead exemption becomes questionable. The safest and best approach requires "formal designation" of the primary homestead to avoid potential objections of creditors. This formal designation of primary homestead should be filed within real property records before filing bankruptcy.
Limitations on designation are contained within the Statutes of the State of Michigan.
Pre-Bankruptcy Planning and Preparation
Pre-bankruptcy planning is a delicate topic with many transactions prohibited, but with the assistance of a progressive bankruptcy attorney, other allowable exemptions may be identified.
In practice, most people who file for bankruptcy will actually improve their credit rating within 18 months or less. In fact, in a chapter 13 filing, credit will begin to improve once late payment reports stop, and secured loans and credit lines begin reflecting timely payments.
Overall, filing for bankruptcy can, for many Americans in many different circumstances, be an important and integral step toward financial recovery and new found fiscal stability. Ultimately, bankruptcy creates opportunities and improves net worth, so long as the decision to file was made wisely.
To learn more about Michigan State Bankruptcy Exemptions, simply go to our U.S. Bankruptcy Exemptions page.
In most states you can legally protect your personal residence in a bankruptcy. The interesting thing is homeowners are treated differently from state to state.
Learn more about the Homestead Act and how it affects you.
Michigan Bankruptcy Code
All Michigan Bankruptcy cases are governed by Title 11 of the United States Bankruptcy Code, by U.S. Bankruptcy Rules, and by local Michigan State Bankruptcy Rules promulgated by Michigan court.
The US bankruptcy court websites generally have links to both, the Federal US Bankruptcy Rules and specific Michigan Bankruptcy Code. Clerks in the bankruptcy courts will not give debtors, or even attorneys for debtors, legal advice, including advice about which bankruptcy rules apply to a given case.
Locate a US Bankruptcy Court in your federal judicial district.
Since US Bankruptcy Code and Michigan Bankruptcy Rules are very technical, and since the case load in the US Bankruptcy Courts makes judges very unforgiving of mistakes or missed deadlines, it's highly recommended to seek the advice of an experienced Michigan Bankruptcy Attorney and Certified Credit Counsellor.
The most recent Changes to the Bankruptcy Code and Bankruptcy Rules came about on April 20, 2005 as President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act. This new Bankruptcy Law came into effect October 17, 2005.
Learn more about the 25 Most Recent Changes to Personal Bankruptcy Law and how they affect you.
