Bankruptcy Basics

The American bankruptcy code consists of numerous laws grouped into Chapters.  These laws were revised in 2005 under the Bankruptcy Abuse Prevention and Consumer Protection Act, BAPCPA (bap-see-pa).  Because BAPCPA is federal law, bankruptcy cases are processed in federal courts. 

Livingston county cases are handled through our bankruptcy court in Flint while Oakland, Wayne and Washtenaw cases are processed in Detroit.  Residents of Ingham county generally must file through the Grand Rapids bankruptcy court which conducts some hearing in Lansing.

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 13 Bankruptcy.  Chapter 11 cases are generally used for business reorganizations while Chapters 9  & 12 are available for Municipalities and Family Farmers respectively.

An easy to read brochure about consumer bankruptcy is available to read or print by clicking the brochure button below:

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 - $43,123;      2 person - $51,878;      3 person - $61,796:        4 people - $74,658

* These income limits are effective March 17, 2008.  Add 6,900 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 to updates.  A 2007 table of the most commonly used property limits is available by clicking on the button below:

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 5 -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 changes.  This initial hearing is referred to as 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.