The U.S. Constitution, Art (Article 1, Section 8, Clause 4) authorizes Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States". We've had various bankruptcy laws enacted since 1801.
Bankruptcy is a path for debt-burdened persons to a fresh start. It reflects a humanitarian public policy as well as an economic one. An unburdened individual is a positive force in the economy while a burdened one is a drag. The concept as we know it today can be traced back to medieval times.
The Bankruptcy Act of 1938 was timely coming out of a depression. But the Bankruptcy Reform Act of 1978 created the system that prevails today.
Chapter 7 Bankruptcy
We focus here on Chapter 7 Bankruptcy the primary pathway for an individual 'fresh start'. If your qualify, in exchange for eliminating your debt, an appointed trustee will take and liquidate (sell) your property to pay back your debt. However, you can keep certain property that by law is exempt from liquidation.
If the proceeds of liquidation of your non-exempt property are insufficient to pay off your debt, those debts are discharged (forgiven). Hence, your "fresh start".
Bankruptcy Means Test in Michigan
Means tests are commonly used to determine eligibility for various types of government assistance or relief. Bankruptcy is considered to be a government relief program.
The Means Test was added to the Bankruptcy Code in 2005. Congress became concerned about increased abuse by people who attempt to use bankruptcy to avoid debts that they could afford to pay off.
The Means Test sets some limits beyond which there is a "presumption of abuse". The Means Test has two levels.
First, if you earn less than the median household of the same size in Michigan, you pass the Chapter 7 Means Test. You qualify to file Chapter 7 bankruptcy.
For the bankruptcy means test in Michigan, the median income benchmark depends on the size of the debtor's family:
1 Member Household - $44,072.00
2 Member Household - $52,540.00
3 Member Household - $61,110.00
4 Member Household - $74,863.00
5 Member Household - $82,963.00
6 Member Household - $91,063.00
7 Member Household - $99,163.00
8 Member Household - $107,263.00
9 Member Household - $115,363.00
10 Member Household - $123,463.00
Second, if you do not qualify under the income threshold test, you can take the full Means Test which requires much more paperwork. Among the forms to be filed with your bankruptcy petition are (1) a list of your property; (ii) your current income, (iii) your living expenses, (iv) your living expenses, (v) your debts and creditors, and (vi) your exempt property.
For the full Means Text, you report your current monthly income and compare your reasonable monthly expenses on Forms 122A-1, 122A-1Supp, 122A-2. If you have little or no disposable income left over you will be qualified to file bankruptcy in Michigan.
Talk to a Bankruptcy Attorney
Are you ready to take the next step in becoming debt-free? We’re here to help. Speak to a Michigan Chapter 7 bankruptcy attorney today at Moran Law, and schedule a free consultation.
