Means Test – Chapter 7 Qualification

To qualify for a Chapter 7 Bankruptcy, you must past the “means test.”

To determine whether one passes the means test, and therefore qualifies for a Chapter 7, their household income must first be calculated. To calculate, you must take the previous 6 full months household gross income, and divide by 6 to average. (Do I have to include my spouse’s income if they are not filing?) For example, if you were to file November 16th, you would add up your household’s income for May through October, then divide by 6. If you were to file December 2nd, you would add up your household’s income for June through November, then divide by 6.

When you file for bankruptcy you are given exemptions that you may use to protect your property. Some exemptions are limited, such as those used to protect your automobile and household goods, and some are unlimited, such as the exemptions you receive to protect any qualified retirement.

401(k)’s, 403(b)’s, pensions and the vast majority of IRA’s are considered to be qualified retirement plans.

For this reason, it does not make sense to take a loan from your retirement plan if you believe a bankruptcy filing is inevitable. Instead, give my office a call so that we may assist you with planning your financial recovery.

In this attorney’s opinion, driver’s responsibility fees only compounds our economic problems and do not “encourage” drivers to drive more responsibly.

Fortunately, Michigan driver’s responsibility fees are generally dischargeable in Chapter 7 bankruptcy, as well as Chapter 13 bankruptcy.

Criminal penalties are not dischargeable in bankruptcy. However, Michigan driver’s responsibility fees are not “criminal penalties.” They are administrative fines levied by the Secretary of State’s office, not as a sentencing judgment or criminal statutory penalty by a criminal court conviction. Therefore, they should not fall under the “criminal penalty” non-dischargeability exception to the list of debts dischargeable under the US Bankruptcy Code as traffic tickets, parking tickets, and other fines may.

Thus, the filing of a Chapter 7 bankruptcy should discharge a driver’s responsibility fee arrearage, after which the Secretary of State’s office should return a driver’s license. However, with that said, the State of Michigan has taken various stances on such issues at various times, including the position that such fees are non-dischargeable “criminal penalties.”

Looking to build or rebuild your credit? You should consider a Secured-CD Loan.

Here is how it works: Bank gives you a loan for $1,000.00. That $1,000.00 immediately goes into a CD. That loan is then secured by the CD. You pay $85.00 a month of 12 months ($1,020 total). At the end of the 12 months, you will receive the CD (now worth approx $1,005).

Such a program will cost you approximately
$15 over the course of 12 months, but you will receive 2 HUGE benefits:
1) All payments will be reported to the three credit bureaus, improving your credit profile.
2) You will be forced to save money!

Clients may wish to delay a bankruptcy until after they have paid creditors whose claims they do not want to see discharged, for example friends or grantors of credit cards they hope to keep.  Such payments, if over $600 and within the applicable preference period could be set aside by the bankruptcy trustee.  Thus, if a client wants to pursue this course of action, and ensure that the creditor retains the payment, the petition must be delayed until after the preference period has run.

In most cases, it is preferable not to delay a bankruptcy for this purpose, but rather to pay the creditor after the petition is filed, using either exempt assets or post-petition income.  There is no impediment to this course of action in a chapter 7 case and usually it will not be questioned in a chapter 13 case.

Debt is typically separated into one of two categories — secured or unsecured. The main difference is that a secured loan contains collateral as a form of security for the creditor. If you do not pay off your debt, the creditor can take the collateral. If you want to keep the collateral, you have to maintain some form of payment. Secured debt is typically not discharged through bankruptcy proceedings unless you elect to surrender the collateral.

Automobile and home loans are almost always secured loans.

The automatic stay is an injunction against against the continuance of any legal action against a debtor or the debtor’s property. 11 U.S.C. 362. The automatic stay protects a debtor from harassing collection calls, evictions, repossessions, foreclosure sales, and garnishment of wages.  The protection from the automatic stay starts as soon as the debtor gets a bankruptcy case number. How long it lasts depends on your circumstances. Visit How Long Does it Last for details on the duration.

Let’s say a creditor lawsuit has been filed against a person who lives in Grand Rapids, MI and that person comes to see me to file a Chapter 7 bankruptcy.  As soon as we get a bankruptcy case number and notify the creditor of the bankruptcy filing, the creditor must stop all collection actions.

For another example, let’s say I have a client from Kentwood, MI who is worried that their car creditor is about to repossess their car.  Once we have a bankruptcy case number and we have notified the car creditor, the car creditor must stop all efforts to repossess the car. Any creditor that ignores the filing of a bankruptcy case and repossesses a car post-petition can be severely punished by a bankruptcy court.

When a person files for bankruptcy, they are immediately extended a number of protections designed to protect them from further actions by creditors. The very minute a bankruptcy has been filed, creditors can no longer to seek collection of the debts. This means any garnishments currently occurring must be terminated.

The Bankruptcy Code also provides a means for recovering wage garnishment that occurred prior to filing for bankruptcy. However, in order to qualify you must of had $600 or more garnish from your paycheck within the 90 days leading up to the filing of your case. If you’re considering bankruptcy due to impending wage garnishment, or if you’ve just started having your wages garnished, you may want to consider waiting to file until you hit the $600 threshold. After all, if you’ve had $599.00, it is probably a good idea to wait and allow your creditor to garnish one more paycheck so you break over the $600 line. This way, with the help of your attorney, you can recoup funds from the creditor who has been reaching into your pocket.

Contact my office today to schedule a free consultation and get more information on our $999 flat fee bankruptcy option.

Many people considering bankruptcy live with the fear of losing all of their property. However, that is not the case. And more often than not, they will not lose anything at all. This is all due to “exemptions.” Think of an exemption as a credit you can use to buy back your property. If you have a loan or lien on a piece of property, then you only need to use your credits to buy back you ‘equity’ in the property (Equity = Value – Loan Amount).

In Michigan, those filing for bankruptcy have the option of choosing Federal or Michigan exemptions. A quick run-down is as follows.

Homestead – $23,675
Household Goods – $12,625
Motor Vehicles – $3,775
Tools of Trade – $2,375
Jewelry – $1,600
Wildcard – $13,100

Homestead – $38,225 (standard), $57,350 (over 65yrs or disabled), unlimited (if you and your spouse both own the home)
Household Goods – $3,825
Motor Vehicles – $3,525
Tools of Trade – $2,550

Additionally, you may have unlimited exemptions to protect property such as life insurance proceeds and retirement accounts.

Give us a call at (616) 920-0555 or send me an email at if you have any questions regarding exemptions and would like to speak to a licensed attorney in Grand Rapids, MI.

We understand that our clients come to us in a time of need. Many suffer from financial hardship, emotional distress and difficulties in their lives that affect their families.

Mr. Russell has years of extensive experience in bankruptcy, family law and estate planning where he has always taken the sensitive and informed approach to help clients work towards a lasting, stable solution for their families.

Give us a call at (616) 920-0555, or use the email form below, for information on our $999.00 Flat-Fee Bankruptcy option.