Chapter 7 Bankruptcy in Michigan: Who Qualifies and How It Works
Understanding Chapter 7 Bankruptcy in Michigan
If you’re struggling with overwhelming debt, Chapter 7 bankruptcy might provide the financial relief you need. This process, often referred to as “liquidation bankruptcy,” allows qualifying individuals to eliminate most unsecured debts while protecting essential assets under Michigan bankruptcy exemptions. In this guide, we’ll cover who qualifies for Chapter 7 bankruptcy in Michigan and provide a step-by-step breakdown of how it works.
Who Qualifies for Chapter 7 Bankruptcy in Michigan?
Not everyone is eligible for Chapter 7 bankruptcy. To qualify, you must meet specific requirements, including:
1. Passing the Michigan Bankruptcy Means Test
The bankruptcy means test determines whether your income falls below Michigan’s median income level for your household size. If your income is below the threshold, you automatically qualify. If it’s above, additional calculations assess your disposable income after necessary expenses.
Current Michigan median income limits (as of 2/10/2025) for Chapter 7 eligibility:
- 1-person household: $62,161
- 2-person household: $76,158
- 3-person household: $95,969
- 4-person household: $117,799 (adjustments apply for larger households)
2. Your Debt Must Be Primarily Unsecured
Chapter 7 bankruptcy is ideal for individuals burdened by unsecured debts, including:
- Credit card debt
- Medical bills
- Personal loans
- Certain utility bills
Secured debts, such as mortgages and auto loans, are treated differently. If you want to keep your home or car, you must continue making payments or negotiate reaffirmation agreements.
3. You Haven’t Recently Filed for Bankruptcy
You cannot file for Chapter 7 if you:
- Filed Chapter 7 within the past 8 years
- Filed Chapter 13 within the past 6 years (unless repayment was at least 70% completed)
How Does Chapter 7 Bankruptcy Work in Michigan?
If you qualify, the Chapter 7 process generally takes 4 to 6 months from filing to discharge. Below is a step-by-step breakdown:
Step 1: Credit Counseling Requirement
Before filing, Michigan law requires you to complete a court-approved credit counseling course within 180 days. This ensures you understand all available debt relief options.
Step 2: Filing the Bankruptcy Petition
Your attorney will help you file official bankruptcy forms with the Michigan Bankruptcy Court, detailing your:
- Income & expenses
- Assets & liabilities
- Recent financial transactions
- Debts and creditors
Step 3: Automatic Stay Protection
Once filed, an automatic stay immediately stops:
- Wage garnishments
- Creditor harassment
- Foreclosures and repossessions
Step 4: Bankruptcy Trustee & 341 Meeting of Creditors
A bankruptcy trustee will review your case and schedule a 341 Meeting of Creditors (usually within 30-45 days). While creditors may attend, they rarely do. You must answer questions under oath regarding your financial situation.
Step 5: Liquidation of Non-Exempt Assets (If Any)
Michigan bankruptcy exemptions allow you to protect essential assets such as your home, car, and personal belongings. Non-exempt property may be sold to repay creditors, but most filers keep all their assets.
Step 6: Debtor Education Course
A second financial management course is required before your debts can be discharged.
Step 7: Debt Discharge & Fresh Start
Upon completion, the court issues a discharge order, eliminating eligible debts. This marks your fresh financial start!
Michigan Bankruptcy Exemptions: What Can You Keep?
Michigan law offers two exemption options:
- Federal exemptions
- Michigan state exemptions
Choosing the right exemption system is crucial—our Michigan bankruptcy attorney can help you decide which works best for you. Schedule a free consultation today.
How We Can Help
At Legacy Legal & Business Services PLC, we specialize in Chapter 7 bankruptcy in Michigan and can guide you through every step. If you’re struggling with debt, contact us for a free consultation to discuss your options.
📞 Call us at (616) 681-0100 or 📩 Contact us on our website www.legacylegalbusiness.com!
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