Personal Bankruptcy

• An individual Michigan debtor can file for either Chapter 7 or Chapter 13 bankruptcy. Regardless of which chapter the debtor chooses to file under, she must take the means test. The means test determines if the debtor can file for Chapter 7 bankruptcy -- the liquidation of certain property in order to satisfy creditors.
  
  

Means Test

• The debtor begins the means test by comparing his family income to the median family income for a family of the same size in Michigan. If the debtor's family income is less than the median family income in Michigan, the debtor can file for Chapter 7 bankruptcy. As of 2010, the U.S. Department of Justice recorded the Census Bureau's listings of Michigan's median family incomes as $41,875 for a single earner, $49,919 for a family of two, $59,190 for a family of three and $70,600 for a family of four. For each family member in excess of four, add $7,500. If the debtor's family income is more than the state median family income, he must continue with the means test by calculating his monthly disposable income.
  
  

Disposable Income

• The debtor calculates her monthly disposable income by deducting allowed expenses from her monthly income. If the debtor's monthly disposable income is less than $100, she can file for Chapter 7. If the debtor's monthly disposable income is more than $100, but that amount would not pay at least 25 percent of her debts over the next 60 months, the debtor can file for Chapter 7. If the debtor's monthly disposable income is more than $100, and that amount would pay 25 percent of her debts over the next 60 months, the debtor cannot file for Chapter 7. The debtor may, however, convert to Chapter 13 bankruptcy -- a debt adjustment repayment plan. To file for Chapter 13 bankruptcy a debtor must have less than $1,081,400 in secured debt and less than $360,475 in unsecured debt.
  
  

Filing for Bankruptcy

• A debtor must file his bankruptcy petition and bankruptcy schedules with the Michigan bankruptcy court serving his district. The debtor must also pay a $299 fee for filing a Chapter 7 bankruptcy and a $274 fee for filing a Chapter 13. The debtor must also enter a debt repayment plan under Chapter 13. If the debtor's family income is less than the state median, the plan must last three years. If the debtor's family income is more than the state median, the plan must last five years. The debtor makes payments to a trustee and receives a discharge after making payments on time each month for the length of the plan. In a Chapter 7 case, a trustee sells the debtor's property that is not exempt and uses the money earned to pay the debtor's creditors. At the end of the case, the debtor receives a discharge.