Michigan Bankruptcy/Debtor Expenses
I, Walter Metzen, will provide, free of charge as part of your free initial Bankruptcy Analysis, a means test calculation to determine if you are eligible for Chapter 7 Bankruptcy. Nearly 90% of the people who walk through my door are eligible to file a Chapter 7 Bankruptcy in Michigan and get a permanent discharge of their debt. With Chapter 13 Bankruptcy in Michigan, we can develop and affordable repayment plan to fit every budget.
Contact me, Michigan bankruptcy attorney Walter Metzen to learn more about how I can help you get a Fresh Financial Start!.
BANKRUPTCY BY THE NUMBERS
|GROUP / YEAR||1996||1997||1998|
|ALL CASES (845)||$22,000||$23,968||$24,372|
|ON THE WAY DOWN (97)||$38,000||$31,320||$22,416|
|ON THE WAY UP (235)||$17,578||$22,544||$28,404|
Figure 1: Gross Income Trends, 1996-1998 Median Income from All Sources
Income trajectory, unsecured debt, and expenses
Table 2 shows the median levels of unsecured debt and expenses (annualized) reported on Schedules F and J, respectively. Although the debtors on the way down report a higher median unsecured debt than those on the way up ($24,540 vs. $22,088), the difference is not statistically significant. A more informative way to look at this information is presented in the next section. The difference between Schedule J expenses for the two groups (going down=$22,260/yr.; coming up=$23,040/yr.) is statistically significant. We return to this difference in the conclusion of the article.
Table 2: Median Values of Unsecured Debt and Expenses
|GROUP/VARIABLE||UNSECURED DEBT||ANNUAL EXPENSES|
|ALL CASES (845)||$23,707||$21,732|
|ON THE WAY DOWN (97)||$24,540||$22,260|
|ON THE WAY UP (235)||$22,088||$23,040|
Debt to income ratio
The ratio of debt to income provides a useful window into the debtor's financial world. We used the ratio of unsecured debt to 1998 income to test the conjecture that debtors on the way down bring more debt into bankruptcy than do debtors on the way up. In the last section we noted that the difference between the unsecured debt medians of the two groups, while in the direction supporting the conjecture, was not statistically significant. Tables 3 and 4 clarify the relationship by using unsecured debt to income ratios.
Table 3: Unsecured Debt To 1998 Gross Income (Median Ratios)
|ALL CASES (845)||0.89|
|ON THE WAY DOWN (97)||1.08|
|ON THE WAY UP (235)||0.81|
The group of 97 debtors on the way down had a significantly higher median debt-to-income ratio than the 235 debtors on the way up. This relationship is shown even more clearly in table 4, where debtors from the two groups are matched in terms of 1998 income.
Table 4: Debt-income Ratios For Matched Incomes In Two Groups
|ON THE WAY DOWN (97)||110.4(24)||0.92 (19)||1.05 (21)||0.82 (21)||1.05 (12)|
|ON THE WAY UP (235)||2.75 (7)||1.01 (52)||0.91 (67)||0.59 (73)||0.52 (36)|
The debtors on the way down had higher debt-to-income ratios in every matched group except the one between $10,000 and $19,999. Note also that the aberrant median ratio in the less than $10,000 group going down arose from the 12 debtors (half of the group) who reported incomes of zero or close to zero.
ConclusionThe income trajectory of a consumer debtor is a meaningful measure of the debtor's financial world. Whether on the way down or on the way up, consumer debtors in 1998 are overwhelmingly on the lower rungs of the nation's income ladder. More than half of the debtors reported current income greater than their average income over the past two years. This finding does not support the conjecture that most debtors are on a downward income slide at the time of filing. A debtor on the way down is likely to be carrying more unsecured debt relative to income than another debtor, with the same income, who is on the way up. But the same is not true of the expenses claimed by debtors on the way down. As we saw in table 1 and 2, the debtors going down, with less income than the debtors coming up, also claim fewer expenses.
IN CHAPTER 7 FINAL REPORTS - QUICK CHECKLIST
_ _ 1. IS THE FINAL REPORT PREMATURE?
_ _ 2. IS THE APPROPRIATE FEE BEING REQUESTED?
_ _ 3. IS THE TRUSTEE'S FEE REQUEST IN CONFORMITY WITH UNITED STATES TRUSTEE FEE GUIDELINES?
_ _ 4. HAS THE CASH BEEN MANAGED APPROPRIATELY?
_ _ 5. HAVE APPROPRIATE TAX RETURNS BEEN FILED AND PAYMENTS MADE?
_ _ 6. HAVE SECURED CLAIMS BEEN ADDRESSED?
_ _ 7. IS THE PROPOSED DISTRIBUTION TO CREDITORS CONSISTENT WITH SECTIONS 726 AND 507 OF THE BANKRUPTCY CODE?
_ _ 8. HAVE DUTIES OTHER THAN LIQUIDATION OF ASSETS BEEN PERFORMED?
ISSUES SPECIFIC TO COMPLEX CASES
_ _ 9. HAVE ISSUES PECULIAR TO INVOLUNTARY CASES BEEN ADDRESSED?
_ _ 10. HAVE ISSUES PECULIAR TO CASES WITH SUCCESSOR TRUSTEES BEEN ADDRESSED?
_ _ 11. HAVE ISSUES RAISED BY ESTATE SURPLUS OR INSOLVENCY BEEN ADDRESSED?
_ _ 12. HAVE ISSUES ARISING IN CONVERTED CASES BEEN ADDRESSED?
Contact me, bankruptcy attorney Walter Metzen to learn more about how I can help you get a Fresh Financial Start!.
Be sure to Obtain a copy of your Credit Report after your Michigan Bankruptcy Filing and check it for Mistakes.
Contact me, bankruptcy attorney Walter Metzen to learn more about how the new Chapter 7 bankruptcy law may affect your case. I offer a free initial consultation so we can discuss your case personally.