Steps in Chapter 7 Bankruptcy in Michigan
Chapter 7 bankruptcy provides federal court protection for debtors from creditors. Each individual state also helps protect Chapter 7 debtors by providing certain bankruptcy exemptions that can be used to protect personal property. In Michigan, you must file your Chapter 7 petition in the federal bankruptcy court but you must observe additional state rules regarding bankruptcy procedure, including a test to determine if you even qualify to file Chapter 7 bankruptcy in Michigan.
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Consultation With Attorney
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Federal law allows you to file your bankruptcy petition without the help of an attorney, a process known as filing pro se. Since a full understanding of both federal and Michigan bankruptcy laws is key in successfully filing a Chapter 7 petition in Michigan, even the courts recommend that you work with an attorney. Whether or not you choose to file pro se, you can usually visit a few attorneys in the area for free consultations that can prove invaluable as you make important decisions regarding bankruptcy.
Choosing Bankruptcy Chapter
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Part of the Chapter 7 bankruptcy process is qualifying to file. If you live in Michigan, your first step in qualifying is to compare your income with the median Michigan income for a family of your size. If you have a lower annual income, then you can proceed with your Chapter 7 petition. If your income is higher, the court then requires you to complete a lengthy form known as the "means test" to determine if you have the "means" to pay any of your creditors back in a payment plan. If the Michigan version of the means test shows you with little to no disposable income, you can still file Chapter 7. If the test shows you have enough disposable income, you must instead file Chapter 13 bankruptcy, in which you must make regular payments to creditors for a number of years.
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The Bankruptcy Petition
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A Chapter 7 bankruptcy petition is a very detailed, lengthy document on which you must report every detail of your financial life. You must provide the court with pay stubs, tax returns and information on all of your debt and assets. Additionally, you must cite the correct Michigan exemptions on your petition if you want to protect your assets from liquidation. If your assets are worth more than the state will allow, you must give them over for the benefit of your creditors. For example, if Michigan offers a tools of trade exemption of $2,300 but you have $5,000 in tools, you may have to turn the excess amount over to the court.
Submitting Your Petition and the Path to Discharge
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When you file your petition, you must pay a filing fee and submit your petition to the correct court. In Michigan, you must file your petition with either the Eastern or Western Bankruptcy District, depending on the county in which you live. Within about a month you must attend a hearing formally called the Section 341 meeting at which your bankruptcy trustee and your creditors may ask you questions about the information in your petition. If no objections to your case are filed within 60 days of this meeting, you can receive a discharge of your debts.
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