Bankruptcy In Michigan Explained

The Ins And Outs Of Filing Bankruptcy In Michigan

Michigan has set a lot of firsts during its proud history: first auto manufactured, first assembly line created and now, it has taken first place amongst all fifty states in the number of people filing bankruptcy in Michigan. Not exactly a record to be proud of but in a state whose economy turned around on the production of fine cars, the industry that has taken the biggest hit when it comes to the economy, it is not exactly a surprise. If you are thinking about filing in this state, there are a few things that you will need to know.

Why File Bankruptcy?

With the current economy the way it is, the numbers of people filing bankruptcy in Michigan have tripled over what they were just a few years back. With so many people out of work, they will quickly turn to legal means to get their finances back under control or perhaps even a clean slate. Banks being so quick to foreclose on mortgages is certainly not helping and neither is the threat that unemployment benefits are sure to run out before long. Filing for bankruptcy can be a desperate measure, but it is one that will ultimately help out in the long run.

Chapter Seven or Chapter Thirteen Bankruptcy In Michigan

If you just want to get your finances under control and work towards a better credit rating, then it might be wise for you to file for a Chapter Thirteen bankruptcy. You will need to get all of your outstanding debt paperwork together, as well as proof of income and bank statements. As with all bankruptcies, hiring a lawyer specialized in this type of legal matter can help and in this way you can be sure that everything you need is covered. As this type of bankruptcy allows for you to pay off your creditors over time, you will also have to work with a credit counseling agency to secure a payment that you can afford, so that you do not wind up in the same situation a year down the road. Unlike Chapter Seven, it will only affect your credit rating for a couple years, and will improve it much faster, as long as you keep up the payments.

With Chapter Seven bankruptcy in Michigan, all of your debt is discharged and you start over with a clean slate. However, it will affect your credit rating for as much as seven years and will not allow you to take on new credit debt for some time. In this economy, especially if you are looking for a job, this can affect getting new employment in a negative way as well, unfortunately. All too many employers will run a credit check and bankruptcy of any kind may be a deterrent to you securing the employment you want. This is something that you may want to talk over with a bankruptcy attorney or credit counselor before deciding that filing bankruptcy in Michigan under Chapter Seven is what you want to do.

Michigan Bankruptcy Laws Explained

Back in 1978, after the Federal government first created what would become the national bankruptcy code, the Michigan bankruptcy laws were created, as did states all across the country.
In 2005, the Federal government amended those original laws in light of certain illegal acts being committed that further defrauded the creditors during bankruptcy actions. A lot of states followed suit, further defining and tightening up the ins and outs of bankruptcy, including Michigan and with that state now leading the pack in terms of petitions filed, it is time that those adjustments be explained and clear up any lingering confusion.

Chapters and Loopholes

Under the original Federal laws concerning bankruptcy, two ways of clearing debts were established, called Chapters 7 and 13, respectively. Under Chapter 13, debtors were allowed to repay their creditors over time, at a negotiated rate that they could afford without harm. Under Chapter 7, debtors that could prove to the satisfaction of the court that they were in a dangerous financial position that would no longer allow then to pay their debts were allowed to walk away owing nothing and the creditors had to fully discharge any debts owed.

The problem with the original laws was that debtors could find their way through loopholes that allowed them to sell off or transfer assets like property before their financials were analyzed by the courts, thereby protecting them from seizure proceedings. With the loopholes evident in the laws, a husband could place their home, cars and other valuable assets that the creditors would normally seize in the name of his wife, who was protected from financial harm, as long as her name was not included in the petition for bankruptcy. Only assets held by the husband or jointly with his wife were forfeit, any assets held solely by the wife was completely untouchable. Creditor associations kept petitioning the government for quite some time until measures were taken to close up these loopholes.

Changes under Michigan bankruptcy laws

Changes to this state’s bankruptcy laws have now been edited to set down some easy to follow parameters that will clear up any confusion as to who qualifies to file for bankruptcy and how to proceed. The first requirement that must be met is the residency clause. In order to file for bankruptcy in Michigan, you must have resided, without interruption, for a minimum of six months. Next, you must be able to present records showing a definite need for filing bankruptcy, and this must include current income. To be honest, in light of recent crackdowns on the Federal laws, if you are employed in any fashion, and have reportable income, your best option should be Chapter 13.

Everyone who files for bankruptcy in Michigan will also need to complete a credit counseling course before your case is adjudicated and another immediately afterward, which will allow your filing to become fact and change your debt standing. You will also have to produce any and all documents outlining your assets, in whose name they are legally in, tax returns, and a list of what accounts you want included under the bankruptcy. Following this, you must attend a 341 hearing where your creditors will petition for resolution of the debt you owe to them. With the help of a bankruptcy lawyer, under the Michigan Exemption Statute, you may be able to protect some assets from being seized, a recent addition to the Michigan bankruptcy laws that protects debtors from predatory creditors.

Steps To Take When Filing Bankruptcy In Michigan

Filing bankruptcy in Michigan can be a stressful and confusing experience, even with the help of a good bankruptcy attorney or counselor. There are so many files to gather, paperwork to fill out and fees to be paid. Just the thought of going through the proceedings can be depressing and to some people, shameful to consider. It is not a quick and easy fix, not in the long run, even though the relief you will feel after the proceedings are done can be euphoric. To help you make the transition a little smoother, we will outline the steps you need to take to get it all done and over with.

Are You Eligible For Bankruptcy In Michigan?

Even though Michigan is now the leader in bankruptcies over the last few years, there are still some qualifications that you need to be aware of. For starters, in order to begin filing bankruptcy in Michigan, you need to have lived here for at least six months. If you have not lived here for long, you may have to wait to begin proceedings or perhaps go back to the state where your debt was originated.

If you are currently employed, you will be encouraged to not only attend credit counseling classes, but you will also be encouraged to file Chapter 13, instead of Chapter 7. Chapter 7 does give you a clean slate and a chance to start over, but with the economy the way it is currently, it has also been greatly abused by those who were employed and could have easily paid back their debt over time.

Where to File For Bankrutpcy In Michigan?

There are two districts of bankruptcy court currently in practice in Michigan. The Eastern District has three courts and which one you will go to will depend on your residence area. Jackson, Lenawee, Macomb, Monroe, Oakland, St. Clair, Sanilac, Washtenaw and Wayne counties will appear at the court in Detroit, 211 W Fort Street. Genesee, Lapeer,, Livingston, and Shiawassee counties attend the court in Flint, at 226 W 2^nd St. The upper northeastern counties have their proceedings adjudicated in Bay City, at 111 First Street.

The Western District has courts in each of the five county seats, which are located in Grand Rapids, Kalamazoo, Lansing, Marquette and Traverse City. This district utilizes its website to handle filing some of the paperwork and the forms you will need to bring with you are available for downloading at that site.

What You Will Need To Provide To the Michigan Bankruptcy Court

You will need a complete list of all assets and liabilities, a projection of income and all monthly expenditures. While bankruptcy laws will protect savings and retirement accounts, you still need to give the court all of the necessary details. You will also have to provide copies of your tax returns, going back at least two years and proof that you have attended a federally sponsored credit counseling course. Along with the court filing forms, you are well on your way to filing bankruptcy in Michigan.