The U.S. Bankruptcy Code is federal law which requires bankruptcy cases to
be handled by federal bankruptcy courts, not state courts in each county. Your county residence does, however,
determine which bankruptcy court your case will be filed in.
County bankruptcy cases are filed at our bankruptcy court in Flint. Oakland, Wayne and Washtenaw cases are
filed in Detroit and residents of Ingham county must file at the Grand Rapids bankruptcy court which conducts hearings
Most consumer bankruptcy cases are filed pursuant
to the laws of Chapter 7 or Chapter 13 of the bankruptcy code and are referred to as a Chapter 7 or a 13 bankruptcy.
Chapter 11 cases are generally used for business reorganizations while Chapters 9 & 12 are available for Municipalities
and Family Farmers respectively.
As easy to read brochure
about consumer bankruptcy is available to read or print by clicking this brochure button:
One significant change in the 2005 Bankruptcy laws is a limit
on the household income allowable to qualify for a Chapter 7 Bankruptcy. The Michigan limits are as follows*:
1 person - $44,718 2 person -
$53,310 3 person - $62,005 4 person - $75,960
* These income limits ar effective May 1, 2014. Add $8,100 for each individual
in excess of 4. Household income in excess of these rates can create a rebuttable presumption of Chapter 7 abuse.
Exempt property limits, as described in the Brochure above, are subject ot updates.
A 2010 table of the most commonly used property limits is provided in the following spreadhseet:
A bankruptcy case is started with the filing of a 'Petition' with the appropriate bankruptcy court.
While the Petition itself is only 3 pages, numerous schedules must also be filed with the court and typically include an additional
40 - 60 pages for a consumer bankruptcy. The purpose of the schedules is to provide the court with a detailed accounting
of a consumer's assets, debts, financial history and income & expenses. A brief list of the documents necessary
to complete these schedules is provided in the Forms section of this website along with a Questionnaire to be completed.
After a Petition is filed, a case number is assigned and an initial hearing is scheduled,
typically 4 - 6 weeks later. A bankruptcy court Trustee is assigned to each case and questions the debtor under oath
to verify the information in the petition and schedules and inquire about any chanbges. Ths initial hearing is referred
to a a '341 Hearing' and provides creditors with an opportunity to appear and question the debtor under oath as well.
Although the circumstances of each case vary widely, many Chapter 7 cases are resolved within 6 months of filing and include
a 'Discharge' of unsecured debts. Chapter 13 cases generally extend for 3 - 5 years and involve a partial repayment
of debts based on the consumer's disposable income.
Of Special Interest ~ Due to
the tremendous decline in real estate values, there is an option in Chapter 13 Bankruptcy that is becoming increasingly valuable
to consumers. Homeowners with more than 1 mortgage may be able to 'strip off' their second mortgage if the current market
value of their home is below the balance of their 1st mortgage. This type of 'stripping' means that the second mortgage
has essentially become an unsecure debt, like a credit card, because the value of the home (collateral) has gone down.
This is only an option in Chapter 13 cases which run for 3 - 5 years and a portion of the debts must be repaid based on the
debtor's income, allowable expense, and ability to pay. Each ase is unique and the decision to take advantage of this
option will depend upon your individual circumstances. An appraisal of the home is generally necessary to prove that
its current market value is below the balance of the 1st mortgage.
of the principles behind the Chapter 13 'mortgage stripping' is that if the home was sold or foreclosed at this time, the
proceeds from the sale wold not be sufficient to pay anything to the 2nd mortgage creditor anyway. Second mortgage creditors
have become 'unsecured' creditors due to the decline of our rela estate market. By allowing homeowners to strip off
the 2nd mortgage, the courts are essentially preserving the stability of communities and families without any additional adverse
effects to a 2nd mortgage creditor.