Bankruptcy can be an intimidating process, but knowing the laws specific to your area can make the process smoother. If you’re in Sterling Heights and considering filing for bankruptcy, find out what you need to know right here.
In 2023, 18,236 people filed Chapter 7 and Chapter 13 in Michigan. [1]
Laws on Qualifying for Bankruptcy in Sterling Heights, Michigan
For Chapter 7 bankruptcy, your eligibility is based on your income and household size. To qualify, you need to pass the “means test,” which compares your monthly income to the median income for a household of your size in Michigan. [2]
If your income falls below the state median income, you automatically pass the means test and can proceed with a Chapter 7 bankruptcy filing. If your income exceeds the median income, additional calculations are involved to determine whether you still pass the test.
In these cases, you’ll need to document your expenses and deduct certain amounts allowed by the bankruptcy code, such as rent, utilities, insurance, and other necessary living expenses. If, after these deductions, your disposable income falls below a certain threshold, you may still qualify for Chapter 7 bankruptcy.
Chapter 13 bankruptcy allows you to reorganize your debts and develop a repayment plan over three to five years. A consistent source of income that enables you to meet your monthly repayment obligations. Chapter 13 bankruptcy requires you to repay a portion of your debts, unlike Chapter 7 bankruptcy, where most debts are discharged entirely.
Before filing for bankruptcy, mandatory credit counseling with an approved agency is a requirement. This counseling session aims to evaluate your financial situation, explore alternative solutions to bankruptcy, and provide you with the necessary tools to make an informed decision.
Automatic Stay and Bankruptcy
The automatic stay is a powerful tool that goes into effect immediately upon the filing of a bankruptcy petition. It’s a legal mandate that prohibits creditors from taking any further action to collect debts or pursue legal actions against the debtor. This provision offers a welcome relief to individuals and businesses, providing them with the breathing room needed to reorganize their finances or liquidate assets in an orderly manner.
The automatic stay prevents creditors from continuing or commencing any collection activities, including foreclosures, repossessions, wage garnishments, lawsuits, utility disconnections, and even harassing phone calls or letters.
Under Chapter 7 bankruptcy, the automatic stay stays in effect until the discharge of debts, which typically occurs within a few months of the filing date.
Under Chapter 13 bankruptcy, the automatic stay remains in effect throughout the duration of the repayment plan, which can last from three to five years.
Certain actions or proceedings, such as criminal proceedings, child support or spousal maintenance arrears, and tax audits or assessments, may not be stayed by the bankruptcy filing.
Michigan State Exceptions for Bankruptcy
Exemptions allow individuals to keep certain assets and properties during the bankruptcy process. While federal bankruptcy laws exist, Michigan provides its residents with the option to choose between federal or state exemptions.
Retirement accounts, including 401(k)s, IRAs, and pension plans, are typically fully protected from creditors’ claims.
Becoming familiar with these bankruptcy laws and exemptions can provide peace of mind for Sterling Heights residents during challenging financial times.
Contact Frego today to schedule a consultation and learn more about filing bankruptcy in Sterling Heights.
FAQs
While it is possible to file for bankruptcy on your own, known as filing “pro se,” it is highly recommended to seek the assistance of an experienced bankruptcy attorney. Bankruptcy laws can be complex and vary from state to state, including in Sterling Heights. An attorney will have in-depth knowledge of bankruptcy laws and procedures, ensuring that your case is handled correctly and all necessary paperwork is filed accurately.
Bankruptcy will have a negative impact on your credit score, and it will remain on your credit report for several years. Over time, as you take steps to rebuild your credit and demonstrate responsible financial behavior, you can begin to improve your creditworthiness. This may involve practicing good financial habits, such as making timely payments, keeping your debt levels low, and maintaining a positive payment history.
Gather all your financial documentation, including income statements, tax returns, and a list of assets and debts. Complete the necessary bankruptcy forms, such as the petition, schedules, and statement of financial affairs. These forms detail your financial situation and provide information to the bankruptcy court. You will file these forms with the bankruptcy court in Michigan, paying the required filing fee.
Sources:
[1] Court Statistics | Eastern District of Michigan | United States Bankruptcy Court. (n.d.). https://www.mieb.uscourts.gov/court-statistics
[2] Chapter 7 Means Test Calculation. (n.d.). United States Courts. https://www.uscourts.gov/forms/means-test-forms/chapter-7-means-test-calculation
