A Great Alternative To Michigan Bankruptcy

As of 2021, Michigan’s total state debt is approximately $32.4 billion, according to the US Debt Clock. This includes both outstanding debt, which is the amount that the state currently owes, as well as unfunded liabilities, which are the future obligations the state has to pay for pensions and other benefits for its employees. Of the total state debt, approximately $3.3 billion is attributable to general obligation bonds, which are issued to fund infrastructure and other public projects. The remaining debt is primarily composed of revenue bonds, which are issued to fund specific projects such as transportation and education. It’s worth noting that Michigan’s debt per capita is lower than the national average, at approximately $3,227 per person compared to the US average of $4,331 per person. However, like many states, Michigan faces ongoing challenges in managing its debt and balancing its budget. As of 2021, Michigan’s bankruptcy rate is below the national average. According to data from the United States Courts, there were 13,392 bankruptcy filings in Michigan in 2020, which equates to a rate of 1.33 filings per 1,000 people. This is slightly below the national average of 1.47 filings per 1,000 people.

Bankruptcy Laws in Michigan

Bankruptcy laws in Michigan are primarily governed by the federal Bankruptcy Code, which applies to all bankruptcy cases filed in the United States. However, Michigan also has its own state-specific bankruptcy laws that can affect the bankruptcy process. One of the key differences in Michigan’s bankruptcy laws is the homestead exemption, which allows individuals to protect a certain amount of equity in their primary residence from creditors in bankruptcy proceedings. As of 2021, the homestead exemption in Michigan is $48,000 for a single person or $96,000 for a married couple filing jointly. This means that if a person’s equity in their home is less than the exemption amount, they may be able to keep their home in a bankruptcy proceeding. Another unique feature of Michigan’s bankruptcy laws is the ability to choose between state and federal exemptions for certain types of property. This can allow individuals to better protect their assets in bankruptcy proceedings. In addition to these state-specific provisions, Michigan also follows federal bankruptcy laws regarding the types of debts that can be discharged in bankruptcy, the process for filing for bankruptcy, and the rules for creditor collection efforts during bankruptcy proceedings.

What Types of Bankruptcy Are There For You Personally and For Your Business?

There are several types of bankruptcy that individuals and businesses can file for in the United States, each with its own eligibility requirements and benefits.

For individuals, the two most common types of bankruptcy are Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy is often referred to as “liquidation” bankruptcy, as it involves the sale of non-exempt assets to repay creditors. In a Chapter 7 bankruptcy, a court-appointed trustee will sell non-exempt assets to pay off as much of the individual’s debt as possible, and any remaining unsecured debt is typically discharged. Chapter 7 bankruptcy is typically available to individuals who pass a means test, which evaluates their income and expenses to determine their ability to pay off debts.Chapter 13 bankruptcy, on the other hand, is often referred to as “reorganization” bankruptcy, as it involves the creation of a repayment plan to pay back creditors over a period of three to five years. In a Chapter 13 bankruptcy, the individual keeps their assets and makes regular payments to the trustee, who then distributes the payments to creditors according to the repayment plan. Chapter 13 bankruptcy is often a good option for individuals who have a regular income but are struggling to keep up with their debts.

For businesses, the most common types of bankruptcy are Chapter 7 and Chapter 11 bankruptcy. Chapter 7 bankruptcy for businesses involves the liquidation of the business’s assets to pay off creditors, and the business ceases operations. This type of bankruptcy is typically used when the business is unable to pay its debts and does not have a viable plan for reorganization. Chapter 11 bankruptcy for businesses, on the other hand, allows the business to continue operating while it reorganizes its debts and operations. The business must submit a reorganization plan to the court, which outlines how it will repay its creditors over a period of time. Chapter 11 bankruptcy is typically used by larger businesses that have a viable plan for restructuring and continuing operations.

Bankruptcy Chapters 7, 13 and 11 – What You Need to Know 

Things You Should Consider When Thinking About Business Bankruptcy

If you’re considering filing for business bankruptcy in Michigan, there are several important things to keep in mind. Here are some key considerations:

• Understand your options: Bankruptcy is not the only option for struggling businesses, and it’s important to explore all possible avenues before deciding to file. For example, you may be able to negotiate with creditors or restructure your business to reduce expenses and increase revenue.
• Know the different types of bankruptcy: As I mentioned earlier, there are several types of bankruptcy for businesses, each with its own benefits and drawbacks. It’s important to understand the differences between Chapter 7 and Chapter 11 bankruptcy and to consult with an experienced bankruptcy attorney to determine which is the best option for your business.
• Prepare your financial records: In order to file for bankruptcy, you’ll need to provide detailed financial records to the court, including income statements, balance sheets, tax returns, and other documents. It’s important to gather and organize these records in advance to ensure that you’re fully prepared for the bankruptcy process.
• Understand the impact on your business and personal finances: Bankruptcy can have significant implications for both your business and personal finances. For example, your credit score may be negatively impacted, and you may have difficulty obtaining credit in the future. It’s important to fully understand these consequences and to plan accordingly.
• Seek professional advice: Filing for bankruptcy can be a complex and overwhelming process, and it’s important to seek professional advice from an experienced bankruptcy attorney. An attorney can help guide you through the process, ensure that you understand your options, and help you make informed decisions about the future of your business.

What Debts Are Not Discharged in Bankruptcy?

While bankruptcy can help individuals and businesses eliminate or restructure many types of debt, not all debts are dischargeable. Here are some examples of debts that are generally not discharged in bankruptcy:

• Certain tax debts: While some tax debts may be dischargeable in bankruptcy, others may not be. For example, income tax debts that are less than three years old, or that were assessed within the last 240 days, are generally not dischargeable.
• Student loans: In most cases, student loans cannot be discharged in bankruptcy. However, there are certain exceptions for borrowers who can demonstrate undue hardship.
• Child support and alimony: Debts owed for child support and alimony are not dischargeable in bankruptcy.
• Debts incurred through fraud or intentional wrongdoing: Debts incurred through fraudulent or intentional conduct, such as credit card fraud, are generally not dischargeable in bankruptcy.
• Fines and penalties: Debts owed for fines and penalties imposed by government agencies, such as traffic tickets or court fines, are generally not dischargeable in bankruptcy.
• Debts incurred after filing for bankruptcy: Any debts incurred after the bankruptcy case is filed are generally not dischargeable in bankruptcy.

How Bankruptcy in Michigan Affects Your Credit Score and Your Ability to Get a Loan in The Future

Filing for bankruptcy in Michigan can have a significant impact on your credit score and your ability to obtain credit in the future. When you file for bankruptcy, it will be noted on your credit report and will remain there for a period of seven to ten years, depending on the type of bankruptcy you filed. This can make it difficult to obtain credit in the future, as lenders may view you as a higher risk borrower. In addition to the impact on your credit score, filing for bankruptcy can also limit your ability to obtain certain types of loans or credit in the future. For example, it may be more difficult to obtain a mortgage or car loan, and you may be required to pay higher interest rates or put down a larger down payment.

How Does Bankruptcy in Michigan Affect Tax Debt?

Bankruptcy in Michigan can have different effects on tax debts, depending on the type of tax debt and the type of bankruptcy filing. Here are some key points to keep in mind:

• Income tax debts: Income tax debts can be discharged in bankruptcy, but only if certain conditions are met. Specifically, the tax debt must be at least three years old, and the taxpayer must have filed a tax return for the debt at least two years before filing for bankruptcy. Additionally, the tax debt must have been assessed by the IRS at least 240 days before the bankruptcy filing.
• Property tax debts: Property tax debts may be dischargeable in bankruptcy, depending on the circumstances. For example, if the taxpayer owes property taxes on a piece of real estate that is included in the bankruptcy estate, the tax debt may be discharged.
• Sales tax debts: Sales tax debts are generally not dischargeable in bankruptcy. However, if the taxpayer is a business that is filing for Chapter 11 bankruptcy, it may be possible to restructure the debt and negotiate a payment plan with the taxing authority.
• Payroll tax debts: Payroll tax debts are generally not dischargeable in bankruptcy. However, if the taxpayer is a business that is filing for Chapter 11 bankruptcy, it may be possible to restructure the debt and negotiate a payment plan with the IRS.

Will You Lose Your Home or Car in Bankruptcy in Michigan

Whether you will lose your home or car in bankruptcy in Michigan depends on several factors, including the type of bankruptcy you file, the equity in your property, and whether you are current on your payments. In Chapter 7 bankruptcy, which is a liquidation bankruptcy, your non-exempt assets may be sold to pay your creditors. However, Michigan has generous exemptions for homes and vehicles, so it is likely that you would be able to keep your home and car if you file for Chapter 7 bankruptcy. The exemptions allow you to protect a certain amount of equity in your home and car, which can vary depending on your specific situation. In Chapter 13 bankruptcy, which is a reorganization bankruptcy, you would typically keep your home and car as long as you are current on your payments. Chapter 13 bankruptcy involves a repayment plan where you would pay off your debts over a period of three to five years. During this time, you would be required to continue making your mortgage and car payments. If you fall behind on your payments during the bankruptcy, your home or car could be at risk of foreclosure or repossession.

Statute of Limitations for Collections in Michigan

In Michigan, the statute of limitations for collections is generally six years from the date of default or the last payment on the debt, whichever is later. This means that if a creditor wants to sue you to collect a debt that is past due, they must do so within six years of the default or last payment. It’s important to note that the statute of limitations can vary depending on the type of debt. For example, the statute of limitations for written contracts in Michigan is six years, while the statute of limitations for oral contracts is only three years. Additionally, there are some situations where the statute of limitations can be extended or paused, such as if you leave the state or if you make a partial payment on the debt.

Cons of Bankruptcy in Michigan

While bankruptcy can provide a fresh start for individuals and businesses struggling with debt, there are also some potential drawbacks to consider. Here are some of the cons of bankruptcy in Michigan:

• Impact on credit score: Filing for bankruptcy can have a significant negative impact on your credit score, and the bankruptcy filing will remain on your credit report for up to 10 years. This can make it more difficult to obtain credit in the future, and may result in higher interest rates or less favorable terms.
• Loss of assets: Depending on the type of bankruptcy filing, you may be required to surrender certain assets or property to pay off your debts. This could include your home or car, although in many cases you may be able to keep these assets if you can continue to make payments.
• Public record: Bankruptcy filings are public record, which means that anyone can access information about your bankruptcy. This could potentially impact your employment prospects, as some employers may view bankruptcy as a negative factor when considering job candidates.
• Cost: Filing for bankruptcy can be expensive, and you may need to pay filing fees and attorney fees. Additionally, if you are filing for Chapter 13 bankruptcy, you will be required to make monthly payments to a bankruptcy trustee for several years.
• Emotional impact: Bankruptcy can be a stressful and emotionally difficult process, as it involves admitting financial failure and can have a significant impact on your life and future plans.

Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy

Why People Regret Filing Bankruptcy

While bankruptcy can provide relief from overwhelming debt, there are also some reasons why people may regret filing for bankruptcy. Here are a few possible reasons:

• Emotional impact: Bankruptcy can be emotionally difficult, as it involves admitting financial failure and can have a significant impact on your life and future plans. Some people may feel ashamed or embarrassed about filing for bankruptcy, which can lead to feelings of regret or disappointment.
• Impact on credit score: Filing for bankruptcy can have a significant negative impact on your credit score, and the bankruptcy filing will remain on your credit report for up to 10 years. This can make it more difficult to obtain credit in the future, and may result in higher interest rates or less favorable terms.
• Loss of assets: Depending on the type of bankruptcy filing, you may be required to surrender certain assets or property to pay off your debts. This could include your home or car, although in many cases you may be able to keep these assets if you can continue to make payments.
• Public record: Bankruptcy filings are public record, which means that anyone can access information about your bankruptcy. This could potentially impact your employment prospects, as some employers may view bankruptcy as a negative factor when considering job candidates.
• Incomplete debt relief: Bankruptcy may not provide a complete solution to all of your financial problems. For example, some debts may not be dischargeable in bankruptcy, and you may still be required to make payments on certain debts, such as student loans or taxes.

Don’t Qualify For Bankruptcy? Don’t Panic

If you do not qualify for bankruptcy in Michigan, it may mean that you do not meet the eligibility criteria for filing under Chapter 7 or Chapter 13 bankruptcy. In this case, you may need to explore other options for managing your debt, such as debt settlement. Debt settlement involves negotiating with creditors to settle your debts for less than the full amount owed. 

Learn more: What Are Your Options When You Don’t Qualify for Bankruptcy

Debt Settlement May Be A Better Option For A Number Of Reasons

• Avoiding bankruptcy stigma: Debt settlement does not carry the same stigma as bankruptcy, which can be important if you are concerned about the long-term impact on your reputation.
• Avoiding legal fees: Debt settlement may be less expensive than bankruptcy, as you may be able to negotiate directly with creditors and avoid hiring an attorney.
• Maintaining some control: With debt settlement, you may have more control over the process and the outcome compared to bankruptcy, as you can negotiate directly with creditors and potentially preserve some of your assets.

Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help

CuraDebt Is At Your Service

CuraDebt, a professional debt settlement firm, is a great alternative to bankruptcy. We have a team of debt professionals who are ready to help you better understand and potentially eliminate your debts. Contact us today for your free consultation. 1-877-850-3328

Learn how to choose the best Debt Relief Company