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Bankruptcy in Michigan

The people of Michigan have faced difficult economic times, especially in the last several years. Bankruptcies are prevalent. But, this is exactly why our Founding Fathers provided for bankruptcy in the U.S. Constitution. They recognized the need for a fresh start, a clean slate, over 200 years ago.

How Michigan Bankruptcy Law Differs from the Laws of Other States

The procedure for filing bankruptcy in Michigan is exactly the same as in other states. However, Michigan allows its residents to protect many (or all) of their assets under either federal exemptions or state exemptions. You get to pick.

It’s important to note that there are additional exemptions available:

  • For example, retirement plans that you set up at work such as a 401(k) or 403(b) are totally protected, no matter how large or small.
  • In addition, if you are married and only one spouse is filing for bankruptcy protection, your house will be totally protected under tenancy by the entireties laws.

Should I File Under Chapter 7 or Chapter 13?

The very good news is that no matter which chapter of bankruptcy you file under, you probably get to keep all of your assets, so long as you can continue to make the payments.

Those who don’t qualify for Chapter 7 filings, usually file Chapter 13.

  • Filers must pass a “means test” to qualify for Chapter 7, which is technically a “liquidation” bankruptcy. This means assets are liquidated (i.e. sold) to pay off creditors. However, most filers don’t lose any assets and unsecured debts are eliminated.
  • There is no test to file Chapter 13 bankruptcy, which is called a “reorganization” bankruptcy. “Reorganization” means that while some debts are discharged, others are renegotiated under more favorable terms, so you can repay them within 3 to 5 years.

A word of caution: Consult with a qualified bankruptcy attorney before deciding which chapter to file under. There is more to the means test than meets the layperson’s eye.

How to Find a Qualified Bankruptcy Attorney

If a loved one has had a great experience with a lawyer, a referral is the best way to find a lawyer for you. Another good way is a referral from another lawyer you’ve worked with or from a CPA or financial advisor.

Always look for an attorney who limits his or her practice to bankruptcy law and who will chat with you to make you feel comfortable. Checking out a bankruptcy lawyer’s website, newsletters, and blogs is a great place to start.

How to Prepare to Work with a Bankruptcy Attorney

The key to working with a bankruptcy attorney is threefold:

  • Trust your attorney and follow his or her advice.
  • Disclose everything and provide all financial information upon request.
  • Jot down your questions and ask them at your next meeting or conference call.

Where to Get Help Filing Bankruptcy

A qualified bankruptcy attorney will be able to give you peace of mind, protect your assets, and answer your questions. Michigan residents have a strong history of being resilient; and, that sometimes means accepting help. Just ask. You too deserve a fresh start.

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