Michigan Bankruptcy Law and Reform Acts
The state of Michigan enacts comprehensive legislative reforms each year, but these changes have not affected debtors rights in bankruptcy to such a great extent as the recent Code reform laws. The Federal Code provides the framework in which Michigan bankruptcy laws apply. Michigan rights to property and the determination of the validity of claims is a central focus of all cases. The federal reform preemptions negated qualification for Chapter 7 in three new ways. Disposable income, comparative income, and total debts owed may all exclude Michigan residents from filing Chapter 7, Previously, qualification for Chapter 7 had been rather simple and almost any person desiring discharge could file.
The disposable income test compares means to the Michigan median income. Any person who earns more than the published Michigan median income must file Chapter 13, and propose plan payments over a period for a period of time not less than 5 years. In practice, these 5 year plans require payments to the trustee each month until all debts are paid in full, or 5 years, at which time the remaining balances are discharged. While the plan is pending, all disposable income must be paid to the trustee, according to a new National Standards Schedule of allowable expenses. These expenses are considered low compared to traditional Chapter 13 payments, yet with the assistance of legal counsel, many debtors are finding new ways to exploit loopholes left by over zealous laws designed to punish innocent victims.
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