Who Pays for Bankruptcies in Michigan?

The US Bankruptcy Code is a set of complex laws covering discharge of debt, the role of the bankruptcy trustee, administration of the case, and rights of filers. It’s confusing to grasp how costs work, so you might wonder: Who pays for bankruptcies in Michigan?

In Michigan, the person filing for bankruptcy is responsible for court fees, credit counseling, and attorney costs. In Chapter 13, payments are made through a repayment plan, while Chapter 7 requires upfront costs. Some filers may qualify for fee waivers or payment plans.

As a Michigan bankruptcy lawyer with over 20 years of experience with Chapter 7 and Chapter 13, I’ve guided many clients through the process to discharge debt and get a fresh start. In this article, I’ll go over two common types of bankruptcy, important provisions of the bankruptcy code, and how the process works.

What is Chapter 7 Bankruptcy in Michigan?

Chapter 7 bankruptcy in Michigan is a liquidation process that helps individuals eliminate unsecured debts. When filing for Chapter 7, a bankruptcy trustee may sell non-exempt assets to pay creditors. However, Michigan bankruptcy exemptions protect certain assets, such as:

A portion of home equity
Vehicles
Personal property

To qualify for Chapter 7, applicants must pass a means test based on income. If eligible, filers typically receive a discharge from the bankruptcy judge within a few months. The filer is responsible for legal fees, court filing costs, and required credit counseling.

How Does Chapter 13 Bankruptcy Work?

Chapter 13 bankruptcy in Michigan allows individuals to reorganize their debts into a structured repayment plan. Instead of liquidating assets, debtors make monthly payments to a trustee for three to five years. This type of bankruptcy is ideal for those with a steady income who want to keep their home or vehicle.

Costs include filing fees, legal fees, and trustee fees. Unlike Chapter 7, Chapter 13 requires debtors to pay some or all of their debts over time. The court must approve the repayment plan before it takes effect.

What’s are Secured Debts and Assets in a Bankruptcy Case?

Secured debts in bankruptcy are tied to collateral, such as a house or car. If payments are not made, creditors may seize the assets. A lender could foreclose on your home or repossess your vehicle. In a Michigan bankruptcy, filers can choose to reaffirm, redeem, or surrender secured debts.

Unsecured debts do not have collateral backing them.

Examples are:

Medical bills
Credit card debt
Personal loans

While Chapter 7 can discharge most debts for unsecured creditors, secured debts must be handled separately. Chapter 13 allows filers to catch up on overdue payments while keeping their property.

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What are the Main Costs for Filing Bankruptcy in Michigan?

Bankruptcy comes with three primary costs:

Bankruptcy court filing fees
Mandatory credit counseling
Attorney fees

Filing fees vary depending on whether the case is Chapter 7 or Chapter 13. Credit counseling is a required step before filing, and debtors must also complete a debtor education course before discharge. Legal fees depend on case complexity and the attorney’s experience. Understanding these costs in advance can help filers budget for the bankruptcy process.

How Much are Filing Fees for Bankruptcy in Michigan?

Filing fees for bankruptcy in Michigan depend on the type of case. As of 2024, the fee for Chapter 7 bankruptcy is $338, while Chapter 13 costs $313. These fees are paid to the US Bankruptcy Court for the Eastern District of Michigan and are non-refundable.

Some filers may qualify for a fee waiver if their income is below a certain threshold. Additionally, Chapter 13 filers can often pay the filing fee in installments. The fees do not include attorney costs or other mandatory expenses.

Do I Have to Pay for Credit Counseling?

Yes, credit counseling is a required cost for all Michigan bankruptcy filers. The U.S. Trustee Program mandates that individuals complete a credit counseling session before filing. The course, which can be taken online or by phone, costs between $10 and $50. A certificate of completion must be submitted with the bankruptcy petition.

After filing, debtors must also complete a financial management course before their debts can be discharged. Some providers offer free or reduced-cost options for those who qualify.

What Should I Expect for Legal Fees?

Legal fees vary based on the complexity of the bankruptcy case. In Michigan, Chapter 7 attorney fees typically range from $1,000 to $2,500, depending on the lawyer’s experience and the filer’s financial situation. Chapter 13 cases usually have higher fees, ranging from $3,000 to $4,500, because they require ongoing legal work.

Many attorneys offer payment plans for Chapter 13 cases, allowing debtors to pay legal fees over time. Having an attorney increases the chances of a successful filing and debt discharge.

How Can a Joint Debt Be a Problem When Filing Bankruptcy?

Joint debts can complicate bankruptcy cases in Michigan. When one spouse files for bankruptcy, creditors may still pursue the non-filing spouse for joint debts. This is especially problematic in Chapter 7 cases, where only the filer receives a discharge. Chapter 13 can provide more protection by restructuring joint debts within the repayment plan.

However, co-signers remain legally responsible for any remaining balance. Understanding joint debt obligations before filing is crucial for protecting both parties’ financial interests.

Is There Limited Protection for the Non-Filing Spouse?

In Michigan, a non-filing spouse receives limited protection when their partner files for bankruptcy. In Chapter 7 cases, creditors can still seek repayment from the non-filing spouse for joint debts. Chapter 13 offers more protection because the repayment plan typically includes joint debts.

Additionally, Michigan follows equitable distribution laws in divorce cases, meaning debts could be divided between spouses. If a non-filing spouse shares responsibility for significant debts, they may need to consider filing jointly.

How Does the Automatic Stay in Bankruptcy Protect Me?

The automatic stay in Michigan bankruptcy is a legal provision that immediately halts most collection actions once a bankruptcy petition is filed. This includes stopping:

Creditor calls
Wage garnishments
Foreclosure proceedings
Lawsuits

The stay remains in effect throughout the bankruptcy process, providing temporary relief to debtors. However, there are exceptions, such as child support enforcement or certain tax actions. It gives individuals time to reorganize or liquidate their debts without the constant pressure from creditors, offering a fresh financial start.

What are Non-Dischargeable Obligations in Michigan Bankruptcy?

Not all debts are dischargeable in a Michigan bankruptcy case. Certain financial obligations remain even after filing. These include:

Student loans (except in cases of undue hardship)
Child support
Alimony
Most tax debts
Debts incurred through fraud
Criminal fines and restitution

In Chapter 13, some of these debts can be repaid over time, but they do not disappear. Understanding which debts remain after bankruptcy helps filers make informed decisions.

Consult with a Michigan Bankruptcy Attorney Today

It’s essential to know who pays for bankruptcies in Michigan, since the fees and costs affect your financial situation. Understanding filing fees, legal costs, and repayment obligations can help you make the best decision for your future. Kostopoulos Bankruptcy Law has in-depth knowledge of Michigan bankruptcy laws and can guide you through the process, so you fully understand your options.

If you’re considering filing, call 877-969-7482 today for a free, no-obligation consultation to discuss your financial situation and potential solutions.

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Answers to FAQs About Who Pays for Bankruptcies in Michigan

What is the average monthly payment for Chapter 13?

The average monthly payment for a Chapter 13 bankruptcy plan in Michigan varies based on income, debts, and expenses. Generally, payments range from $300 to $1,000 per month, but they can be higher for those with significant secured debts, such as a mortgage or car loan. The payment amount is calculated based on disposable income, priority debts, and secured debt obligations. The court must approve the plan, so that creditors receive fair repayment over three to five years.

What disqualifies you from filing bankruptcies?

Several factors can disqualify someone from filing for bankruptcy in Michigan. For Chapter 7, failing the means test—which measures income against state median levels—can make someone ineligible. For Chapter 13, having too much secured or unsecured debt can prevent filing.

Additionally, previous bankruptcy filings within certain timeframes may disqualify an applicant. Fraud, such as hiding assets or submitting false information, can also result in a case being dismissed or denied.

What income is too high for Chapter 7?

Income eligibility for Chapter 7 bankruptcy in Michigan is determined by the means test, which compares household income to the state median. As of 2024, the income limit for a single filer is approximately $64,000, but it increases with household size. If income exceeds the limit, filers may still qualify by deducting allowable expenses. Those who do not pass the means test may need to consider Chapter 13 instead, which involves a structured repayment plan.

Do taxpayers pay for personal bankruptcies?

No, taxpayers do not directly pay for personal bankruptcies in Michigan or anywhere in the U.S. The bankruptcy system is funded through court filing fees, attorney fees, and payments made by debtors. Trustees, who are tasked with managing bankruptcy cases, are compensated from these fees. While some costs are absorbed by creditors in the form of unpaid debts, the general public does not bear the financial burden of individual bankruptcy filings.