Much as every region of the United States continues to suffer through the tumultuous conditions distressing our country – from the declining employment opportunities to the loss of property values, virtually every citizen of America has been directly affected by the financial turmoil – the people of Michigan have arguably been hit harder than any other. Unfortunately, even as prospects diminish with a frightening speed and the lingering effects of economic recession (in some parts of Detroit, houses remain on the market with price tags falling below four figures), Michigan consumers newly turning to the protection of Chapter 7 or Chapter 13 bankruptcy come to realize that the governmental shielding from unsecured debts that has been an important defense against creditor aggression for so many years cannot save every Michigan household under current regulatory status. Legislation passed a few years ago slightly altered bits of the United States bankruptcy code that went largely unnoticed at the time. Still, with thousands of Michigan residents now fighting against monthly credit card and similar debt obligations that they cannot easily pay, the absence of effective bankruptcy protection has resulted in negative consequence previously unforeseen but potentially disastrous for the Michigan tax payers reeling from liquidated jobs – and, even to an extent, entire industries – that most need a helping hand. With real estate equity and other investments dissipating by the day, there’s just no way for some Michigan families to pay their bills on time, but that does not mean that collection agents will halt their phone calls nor that interest rates will stop compounding just because income falters and bankruptcy protection won’t always be in the corner of the deserving Michigan resident.
In a way, those Michigan consumers unable to pass through the gates bankruptcy might blame themselves for our current financial predicament – which, once again, affected Michigan and Detroit so much more devastatingly than the economies of other states – as the tragically ironic consequence of something built from our own garage. Michigan became famous throughout the world as the home of the automobile, and, however else that personal motor vehicles have aided the development of humanity and eroded the global ecosystem, the notion of car loans forever changed the way that Americans thought about credit. A little over three generations ago, for the first time in the history of western civilization, the idea that every household deserved its own auto (something that, by definition, couldn’t be handed down from father and son) made unnecessary debt seem thoroughly normal to the point that Americans who didn’t bother to take out some amount of money for a family vehicle appear almost suspicious. Not that bankruptcy ever had much to do with car loans themselves, unless the vehicle previously repossessed had an amount due that was demonstrably more than the vehicle was found to be worth, but that enviable chassis of consumer credit forever changed the way people in Michigan and the rest of the United States would again consider financial obligations. Nowadays, with the average Michigan wage earner boasting more than fourteen thousand dollars of unsecured debt on more than seven different credit accounts, the previous stigma once attached to bankruptcy had fallen to disrepair, and your authors suppose it was just a matter of time before the government altered the bankruptcy code to match.
Still, even if there was some need for changes to the Chapter 7 and Chapter 13 bankruptcy programs utilized for personal household protection, the Bankruptcy Abuse Prevention and Consumer Protection Act went far above and beyond anything that could be considered reasonable edits. Indeed, rather than streamlining the bankruptcy process, the United States Congress – spurred on by the creditor lobby – made the bankruptcy petition so much more complex and admittance to the program so much more difficult, that the average borrower in Michigan may not even be able to take advantage. The Chapter 7 debt elimination bankruptcy protection, for example, which a majority of borrowers in Michigan probably considered the only form of bankruptcy that they had even heard about, now only applies to those residents of Michigan that have earned less than the median income of the state in the last year. Such an arbitrary measure formally ignores such considerations as the loss of earnings that Michigan residents may be expected to have suffered following the ongoing economic disturbances and the amount of unsecured obligations that they carry even though, with home mortgages and any serious financial matter, the debt to income ratio is judged to be of paramount importance. Nonetheless, after BAPCPA had its way with an economic freedom generations of Michigan tax payers once enjoyed, any one hoping for Chapter 7 bankruptcy protection who’s legally designated a resident of the state of Michigan must make less than forty three thousand dollars. The number changes along with the size of household, of course – fifty one thousand for two members, sixty one thousand for three members, seventy four thousand for four member, and so on – and the recent census data, so your authors would advise every interested consumer within Michigan to contact the state’s attorney general’s office for the most up to date figures.
Even presuming that the borrowers did manage to qualify for Chapter 7 protection under the newly restrictive bankruptcy code – there is, also, a separate means test which supposedly tests the consumer’s income versus their monthly debt payments and state expenses as averaged by the Internal Revenue Service – they must still deal with the repercussions of bankruptcy protection. Under the Michigan homestead provision, for instance, as long as there is an less than twenty thousand dollars worth of equity from the home owner’s primary residence. This exemption can be anything from a co-op to condo to trailer so long as the Michigan consumer declaring bankruptcy protection is listed as one of the owners, and the worth will be judged by an appraisal less than three months old as compared to the mortgages or liens on the property. One of the very few benefits of our current economic doldrums and the resultant dwindling home prices, it seems like every Michigan borrower deserving to declare bankruptcy in the first place shouldn’t need overly worry about the safety of their homes in Chapter 7 or Chapter 13 bankruptcy protection. In exactly the same way, motor vehicles are allowed so long as the blue book value is not more than thirty two hundred dollars more than what’s already owed against the automobile, and, with the depreciation that cars and trucks and motorcycles witness leaving the lot during even the best of economic times, that should not be too much of a problem for the average Michigan borrower.
Continuing down the list of Michigan bankruptcy exemptions, the residents filing won’t have to think about their pensions, retirement accounts, familial support in the manner of alimony and child support, previous owed earnings, payments for wrongful death or criminal victimization, injury compensation (as long as the total is less than twenty thousand dollars in totem), veteran’s benefits, and public assistance such as unemployment compensation or social security. Life insurance policies under Michigan statutes are a little more difficult to easily explain. If the payments are necessary to the support of the Michigan family because the deceased was the sole bread winner, those payments are not to be affected, but, otherwise, there would be a cap on the matured or un-matured life insurance policy and accompanying dividends with the figures to be calculated by the Michigan trustee after the initial petition has been filed. Also, tools of trade – which, quite obviously, may only be defined by the officially designated career path of the filer but would protect any relevant property like professional libraries, applicable uniforms, actual implements of labor, and so on – should be safeguarded from asset seizure to the tune of twenty thousand dollars during Chapter 7 bankruptcy declaration. Personal jewelry, including wedding rings, can’t be valued at more than thirteen hundred dollars, medical equipment and other instruments intended for health preservation are allowed, and household possessions (from clothing to home furnishings to family portraits) are exempted provided that their worth is not deemed to be more than five hundred dollars individually nor more than ten thousand dollars when collected together. Finally, there will be a catch all of just a little more than one thousand dollars for all remaining property not otherwise covered under the exemptions previously out lined, and, should the full amount of the Michigan bankruptcy homestead exemption fail to be an issue, there’s another ten thousand dollars to be used upon whatever the borrowers wish.
Relative to the meager exemptions offered up by the federal bankruptcy code, the Michigan statutes may seem reasonable enough, and, upon first reading, they may even seem appropriate given the potential salvation that Chapter 7 debt elimination could feature. However, the replacement values of household possessions gathered over a lifetime add up quickly, and no Michigan family wants to lose heirlooms to the auction block due to the caprice of a bankruptcy court trustee or because the original paperwork was improperly filled out. This is another unfortunate consequence of the BAPCPA legislation, your authors should mention. Attorneys familiar with Michigan law as well as the over riding national bankruptcy code have become, it is easy to argue, absolutely integral to the bankruptcy process starting with the period in which borrowers first fill out the declaration and creditor matrix. Before the petitions are even handed over to the Michigan county clerk from the borrower’s home region, the experience and of the lawyers selected could mean the difference between objects of enormous sentimental value being saved or being taken away forever by agents of the Michigan judicial system. For that matter, Michigan may actually hold the heads of household who misfile the documents liable for criminal fraud should something go awry or the already harried borrowers become confused through intentionally over-complex verbiage. Rather than (as once designed) a governmental program meant to aid Michigan consumers restart their lives and wrestle down the consumer debt tendrils as simply and effectively as possible, modern bankruptcy protection seems to be pointedly have been rendered as difficult as possible for ordinary borrowers to understand and undertake so that the Michigan tax payers would have every last opportunity for bankruptcy remorse.
Of course, much of the reason that the bankruptcy petition and the accompanying creditor matrix may seem so needlessly complex – as well as that the reason the Bankruptcy Abuse Prevention and Consumer Protection Act passed from the public perception without seemingly a bit of media scrutiny – has quite a bit to do with the mind set and self propagating pride of debtors in Michigan and every where in America. Consumers in this country are bound and determined to rely upon their own wits and sense of fair play when confronting debts the households have taken out that are unable to be satisfied, some degree of self reliance should be applauded, but, as seemingly everything grows more difficult and interconnected throughout the modern world, professional have become a necessary evil for even the most staunch individualist. Time was, Michigan heads of household thought hiring on mechanics to work upon the family automobile demonstrated weakness, but, as technologies grew and every bit of the vehicle became more specialized, the assistance of trained authorities has proven itself near impossible to argue against. In this way, once Michigan borrowers examining the ins and outs of Chapter 7 and Chapter 13 bankruptcy protection have come around to the realization that some sort of formal training and external skill set must be employed to help their cause, they’d be well advised to investigate other avenues of financial wizardry which may even be more beneficial for the best … or, rather, the least damaging resolution of their family’s particular problems.
Compare the American economy to a sports utility vehicle or a high octane muscle car. Our economy – led, with no mistake, by the Michigan auto industry – required a certain sort of fuel (spending sprees indulged without thought of future consequence) to keep everything humming along, but, now that relatively quick fixes like bankruptcy or debt consolidation loans no longer truly apply, every Michigan borrower whose family household budget passed the red line years ago must think about the viability of a complete overhaul by professionals with undeniably greater skill sets. Debt settlement negotiation isn’t cheap, not every settlement firm will deem every household eligible for repairs, but increasing numbers of Michigan residents successfully make their way through the program with every passing month. Debt settlement, unlike the more familiar strategies, does not ignore bankruptcy protection. To point out the most extreme example, Consumer Credit Counseling companies – blanketing the airwaves to reel in untold sums from borrowers AND creditors by keeping them well away from the Chapter 7 debt elimination program for uncertain purpose – pretend that the bankruptcy option would be worse even than maintaining their minimum payments for as long as guilt demands. Rather more sensibly, debt settlement counselors exploit the potential of bankruptcy declaration to start the negotiation cylinders humming, and, by means of the threat of liquidation of mutually agreed upon debts ever remaining a danger to the balance sheets of credit card companies, debt settlement negotiators genuinely garner reductions of unsecured burdens that could near sixty percent of the original. However unlikely the threat may be, it does still exist. In this time following BAPCPA and the formal refutation of Chapter 7 bankruptcy for those Michigan consumers that would ever be able to afford the bankruptcy lawyers now necessary for the effective culmination of bankruptcy, the lingering fumes of bankruptcy protection serve a purpose that could yet drive Michigan families forward through debt settlement to help them to arrive at the end of the credit chase altogether.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
