Bankruptcy in Michigan
Debt weighing you down in Michigan? Many Michigan residents are dealing with job loss, medical expenses, or rising interest rates that make it nearly impossible to stay afloat.
Bankruptcy might be the lifeline that puts you back in control. It can stop creditor calls, freeze foreclosure proceedings, and give you space to breathe.
Michigan law also includes property exemptions that protect what matters most. From your primary residence and vehicle to retirement accounts and household goods, state exemptions are designed to help you keep the essentials.
Don’t try to figure it out alone. A Michigan bankruptcy attorney can help you understand your options. Request a referral today and take the first step toward financial recovery.
Types of Bankruptcy in Michigan
Bankruptcy is a legal option that allows individuals and businesses in MI to reset their finances when debt becomes unmanageable. It offers relief by eliminating or restructuring financial obligations, depending on the type of bankruptcy filed.
However, to qualify, you must demonstrate that a legitimate hardship, such as job loss, illness, or reduced income, has left you unable to meet your current obligations.
If you’re considering bankruptcy, you’ll need to choose between Chapter 7, Chapter 11, or Chapter 13—each with its own eligibility requirements and implications. Chapter 7 is focused on liquidation and fast relief; Chapter 13 sets up a repayment plan over several years; and Chapter 11, often used by businesses or high-income individuals, allows for reorganization of complex debt.
In Michigan, bankruptcy cases are handled by the United States Bankruptcy Court for the Eastern and Western Districts of Michigan. The Eastern District serves areas including Detroit, Flint, and Bay City, while the Western District covers Grand Rapids, Lansing, Kalamazoo, and Marquette.
Chapter 7 Bankruptcy
For many Michigan residents facing unmanageable debt, Chapter 7 bankruptcy offers a chance to wipe the slate clean and begin again. This option is beneficial for those who lack the income to repay what they owe. But before filing, it’s important to take an honest look at your finances—your income, your assets, and your long-term goals.
Chapter 7 is generally available to people whose income has dropped or who have experienced a major financial setback. While it can eliminate most unsecured debts, it may also require you to surrender some non-exempt property.
As soon as your case is filed, an automatic stay halts most collection efforts—including wage garnishments, repossessions, and foreclosures. Still, certain debts like child support, alimony, and criminal restitution are not discharged, and you’ll remain responsible for paying those even after bankruptcy.
To file for Chapter 7 bankruptcy in Michigan, you must pass the means test—a financial screening that determines if your income is low enough to qualify. The first step compares your household income to the state median. If you earn less than the median, you generally qualify automatically.
As of 2025, the median income thresholds in Michigan are $62,849 for a single filer, $80,327 for a household of two, $96,122 for a household of three, and $110,876 for a household of four. For each additional person, you can add $9,900. If your income exceeds these levels, you’ll need to complete a second calculation that subtracts expenses to see if you still qualify.
Chapter 11 Bankruptcy
Chapter 11 bankruptcy is a more detailed and flexible process, commonly used by businesses or individuals with significant assets and complicated financial obligations. Rather than erasing debt or requiring asset liquidation, it gives filers the chance to reorganize what they owe through a structured repayment plan.
Chapter 11 allows you to retain ownership and control of your property throughout the process. Instead of being forced to sell off assets, you work directly with creditors to renegotiate terms. This chapter is often the right fit for those looking to preserve business operations or protect high-value assets.
Filing for Chapter 11 bankruptcy in Michigan involves a detailed look at your financial landscape and a commitment to follow specific federal procedures. You’ll need to compile a comprehensive set of documents that paint a clear picture of your income, assets, debts, and business operations (if applicable).
The paperwork required includes:
- Voluntary Petition (Form 101) – the document that officially starts your Chapter 11 case
- Schedules A/B through J – listings of your assets, liabilities, income, expenses, and financial obligations
- Statement of Financial Affairs (Form 107) – outlining your financial history and recent transactions
- Creditor Matrix – a complete list of all creditors and their contact information
- Disclosure of Attorney Compensation – if you’re working with legal counsel
- Balance Sheet, Profit and Loss Statement, and Cash Flow Statement – for businesses or self-employed individuals
- Reorganization Plan and Disclosure Statement – filed later in the process but essential to court approval
Chapter 13 Bankruptcy
Chapter 13 bankruptcy—often called the wage earner’s plan—allows individuals in MI to reorganize their debt without giving up their property. Once you file, the court appoints a trustee to review your income, expenses, and financial obligations to determine what you can reasonably repay over time.
Chapter 13 sets up a repayment plan that typically lasts three to five years. How much you pay depends on your income, the value of your non-exempt property, and what kind of debt you owe. At the end of the plan, remaining eligible debts may be wiped out. This approach gives you the chance to catch up on mortgage arrears, stop a car from being repossessed, or deal with tax debt.
Chapter 13 is streamlined for wage earners who need breathing room. Once your repayment plan is confirmed, creditors must stick to the court-approved terms.
The Bankruptcy Process in Michigan
Timing a bankruptcy filing is never easy, but if your debts are growing faster than your income and you can’t realistically pay them off within five years, it might be time to take a closer look at your legal options. Bankruptcy isn’t a failure—it’s a legal safety net designed to help you stop the financial bleeding.
In Michigan, the process begins with gathering your full financial profile. That includes documentation of your income, monthly expenses, outstanding debts, and the assets you currently own.
This step is critical—the court needs a complete and accurate picture of your finances to evaluate your case. Missing or inaccurate information can delay the process or even result in your petition being denied, so it’s important to be thorough from the start.
In Michigan, bankruptcy filers are allowed to choose between the federal exemption system and the state’s own set of exemptions, whichever offers more protection based on their unique circumstances.
If you opt to use Michigan’s state exemptions, here are some of the key protections available:
- Homestead: Up to $40,475 in equity in your primary residence (or $60,725 if you’re over 65 or disabled)
- Vehicle: Up to $3,725 in equity in one motor vehicle
- Personal Property: Household goods, clothing, appliances, and furniture up to $700 per item, $4,050 total
- Wages: A portion of earned but unpaid wages is protected
- Pensions and Retirement: Most tax-deferred retirement accounts and public pensions are fully exempt
- Tools of the Trade: Up to $2,550 in tools, books, and instruments needed for your job
- Public Benefits: Unemployment, workers’ compensation, and Social Security benefits are fully protected
Work With an Experienced Michigan Lawyer
Michigan’s exemption laws can help you keep essential assets like your home, vehicle, and retirement savings, so you’re not starting from scratch. To make the most of your options and avoid costly mistakes, it’s wise to speak with a qualified bankruptcy attorney who understands the local rules and court procedures.
Submit a request online or call us today at (866) 345-6784 to get in touch with an experienced lawyer in your area!
About the Author
Aaron is a professional legal writer with a B.S. in English Education from Southern Illinois University – Carbondale. He has written, published, and edited thousands of legal articles for RequestLegalHelp, which has connected over 5 million people to legal help in the United States.
With over five years of experience writing thousands of legal articles for law firms across the U.S. and Canada, Aaron specializes in covering federal, state, and city-level legal issues ranging from auto accidents to wrongful terminations.
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