Understanding Chapter 7 Bankruptcy Qualification in Michigan
Chapter 7 bankruptcy, often called “liquidation bankruptcy,” allows individuals to discharge most unsecured debts while protecting essential assets under Michigan bankruptcy exemptions
The Pros of Chapter 7 Bankruptcy
Key Qualification Requirements
Michigan Bankruptcy Means Test: Determines eligibility based on income. If your income is below Michigan’s median level for your household size, you automatically qualify. If above, additional calculations assess disposable income after necessary expenses.
Debt Type: Chapter 7 is primarily for unsecured debts like credit card balances and medical bills. Secured debts, such as mortgages and car loans, require reaffirmation or surrender.
Previous Bankruptcy Filings: You cannot file Chapter 7 if you:
Filed Chapter 7 within the past 8 years.
Filed Chapter 13 within the past 6 years, unless at least 70% of the repayment plan was completed.
Credit Counseling Requirement: Michigan law mandates completion of a court-approved credit counseling course within 180 days before filing.
Asset Considerations: Some assets may be liquidated to repay creditors, but Michigan exemptions allow protection of essential property.
The Cons of Chapter 7 Bankruptcy
- Credit Impact: Bankruptcy remains on credit reports for up to 10 years, affecting future borrowing ability.
- Loss of Non-Exempt Assets: Some assets may be liquidated to repay creditors.
- Eligibility Restrictions: Individuals must pass the Michigan Bankruptcy Means Test to qualify.
- Not All Debts Discharged: Certain obligations, such as student loans and child support, remain unaffected.
Michigan Compiled Laws (MCL) Bankruptcy Related Links
- MCL Section 600.2914 – Discharge in bankruptcy and judgment cancellation.
- MCL Section 600.5451 – Michigan bankruptcy exemptions.
Michigan Compiled Laws (MCL) Links
For official Michigan bankruptcy statutes, visit the Michigan Legislature’s MCL Search tool.