Michigan bankruptcy laws: What are the Laws Regarding Bankruptcies in the State of Michigan
Bankruptcy laws were not framed in the pre-independence U.S. Debtors were either imprisoned or their property confiscated if they failed to pay the creditors. Post-independence, Congress was given the power to legislate uniform laws on bankruptcy. The first law passed was Bankruptcy law of 1800. This law was limited to traders and provided only for involuntary proceedings. Over time, after several such acts being passed, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed in 2005 by President George W. Bush.
How to file for bankruptcy in Michigan
The federal bankruptcy laws govern the Michigan state. Declaring bankruptcy is a complicated legal process which can be made easy with the help of an attorney. Below are the steps to file for bankruptcy in Michigan.
- Filing a petition: The bankruptcy case begins with a petition, a document that includes the description of the debtor’s debts. The petition is prepared by a lawyer since it is a complex document. Preparing and filing the petition is the hardest part of filing for bankruptcy. The petition has to be filed under chapter 7 or chapter 13 of the U.S. Bankruptcy Code.
- Chapter 7: discharges the debts. A trustee is appointed who liquidates the debtor’s assets. The amount received after liquidation is distributed to the creditor, debtor to start fresh and to the trustee as a commission.
- Chapter 13: allows the debtor to pay most of them off. The debtor signs a repayment agreement promising the creditors to pay full or part of the debt with future income.
- Automatic stay: After filing the petition for bankruptcy, the federal law imposes an ‘automatic stay,’ preventing creditors from taking any action against the debtor. The bankruptcy filing will stop the lawsuit filed by the creditor. Notice of Filing and a Notice of Stay is sent to the creditors by the Bankruptcy Court soon after the filing for bankruptcy. It is illegal for the creditors to collect the debt or even contact the debtor once the notice is received. The creditors can only contact the debtor’s attorney. The debtor can produce the Bankruptcy Court docket number and inform the creditors of the filing if the debtor is contacted before the notice is received by the creditors.
- Meeting of creditors: A bankruptcy trustee is assigned to the debtor. Within 30 days of filing the petition, the debtor has to attend a ‘meeting of creditors’ chaired by the trustee. Generally, the meeting is short with an exchange of questions from the trustee and the creditors, unless the trustee feels that the case is unusual. The debtor filing under chapter 7 will receive a ‘notice of discharge’ in 6 weeks post the meeting unless the case is considered unusual. ‘Notice of Confirmation’ is sent to the debtor who has filed for bankruptcy under chapter 13 within six weeks, and structured payments are made after that.
- Adversary proceeding: If the creditors have objections against the debtor’s discharge, they are given a certain amount of time to file ‘adversary proceeding.’ The adversary proceeding requests the Bankruptcy Court to refuse to discharge a certain debt. The most common reason in the adversary proceeding is fraud. Fraud includes debt such as embezzlement, or fraud in the bankruptcy filed, such as failing to disclose all of your assets. The discharge of debt will be delayed until the adversary proceeding process will determine the outcome.
- Notice of discharge: The debtor will receive a ‘notice of discharge’ if there are no objections under the chapter 7 petition, and on completing the chapter 13 plan.
Michigan bankruptcy laws
The 2005 bankruptcy laws of the United States require a debtor to undergo credit counseling under an authorized counselor, within six months before filing for bankruptcy relief. A financial management instructional course has to be completed by the debtor after filing bankruptcy. Filing for bankruptcy is difficult, but not impossible. The bankruptcy laws are framed to help an individual or business to make a fresh start in life.