Michigan Bankruptcy/Low Income Debtors

Detroit Chapter 7 and Chapter 13 Consumer Bankruptcy Filings

 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

BY: ED FLYNN Executive Office for United States Trustees

 

LOW INCOME CHAPTER 7 DEBTORS: In recent years there has been considerable debate in the bankruptcy community concerning how many chapter 7 debtors might be able to repay some or all of their unsecured debt out of future income. By its very nature, the debate has concentrated on the small proportion of chapter 7 debtors with relatively high incomes. In this column I examine the financial condition of the great majority of chapter 7 debtors who have incomes below the national median for their family size.

        In mid-1998 the Executive Office for United States Trustees obtained a sample of 1,955 recently closed no-asset chapter 7 cases, most of which had been filed in late 1997 or early 1998. The cases were gathered from each of the 84 federal judicial districts served by the United States Trustee Program in proportion to the number of chapter 7 cases filed in each district during 1997. Of the 1,955 total cases, 1,592 (81.4%) had incomes below the national median for their family size. The following chart shows a few key figures for these below median income chapter 7 debtors.

 

FAMILY SIZE NUMBER OF CASES AVERAGE GROSS INCOME AVERAGE NET INCOME AVERAGE EXPENSES MEDIAN* UNSECURED DEBT
1 606 $14,783 $12,061 $14,418 $19,374
2 345 $19,903 $16,729 $20,629 $22,506
3 257 $23,544 $18,816 $22,869 $21,148
4 237 $27,398 $21,665 $24,881 $23,200
5 OR MORE 147 $28,860 $23,669 $27,803 $22,135
TOTAL 1,592 $20,484 $16,675 $19,922 $21,195
 

 

* The median unsecu red debt figures are used because the average figures are skewed by a few debtors with extremely high unsecured debts.
 

        As a group, these debtors were in rather poor financial shape at the time of filing. Average annual gross income for the group was $20,484. Five percent of the debtors (79 of 1,592) reported no income at the time of filing. Their average reported expenses on Schedule J ($19,922) were more than $3,000 above their average net income ($16,675). More than 70% of the debtors reported that their expenses exceeded their income, and only about 10% indicated their monthly net income was at least $100 above expenses. Since the carrying cost of the unsecured debt is not included in the reported expenses, most of these debtors will have to trim expenses or increase their income to remain solvent after bankruptcy.

       Although income and expenses rose according to family size, the median unsecured debt amount was relatively level at around $21,000 for each family size. More than one-half of the debtors had total unsecured debts between $10,000 and $30,000. The typical lower income debtor owed a little over one year's gross income in unsecured debt. For most of the debtors, credit card debt accounted for a majority of the total unsecured debt. Including late fees and over-the-limit charges, the annual carrying cost of the unsecured debt at the time of bankruptcy was over 20% of gross income for the majority of the lower income chapter 7 debtors.

 

      We did not record whether the below median income debtors were homeowners. However, 70.9% of them reported under $25,000 in secured debt (including 34.4% with no secured debt at all), and 21.3% reported over $50,000 in secured debt. The petitions make clear that most of the debtors in the first category are renters, and most in the second category are owners, so the actual home ownership rate is very likely in the 20% to 30% range. Whatever the actual ownership rate for below median chapter 7 debtors, it is far below the national rate, which was 65.9% during the first quarter of 1998.

      Average family size of the below median income debtors was 2.4. The below median income debtors are far more likely to be in households of one (38.1%) than the overall population (25.1%). In contrast, the below median income debtors are far less likely to be in households of two people than the national average (21.7% for debtors vs. 32.4% for the overall population). The proportion of below median income debtors in households of three or more was representative of the population at large.
 

      Although there is no typical chapter 7 debtor, the most common profile would include a one or two person household, with at least one member employed, an income below the national median for that family size, unsecured debts of around $20,000-most of it for credit cards- and expenses greater than net income, even excluding unsecured debt payments. For whatever reasons they got into bankruptcy, by the time they filed they had little if any capacity to repay. In fact, most will have to increase income or reduce expenses to remain solvent after bankruptcy.



  Bankruptcy Basics - For Cases Filed on or after October 17, 2005 (pdf)
Bankruptcy Basics - For Cases Filed before October 17, 2005 (pdf)


   
Contact me, Detroit bankruptcy lawyer Walter Metzen today to schedule your free initial consultation. I also offer clients flexible appointment times and same day appointments if necessary. Get in touch with me today to learn how filing bankruptcy may be beneficial for you and your family. Why should you hire a Board Certified Bankruptcy Specialist? Click Here. My office has handled over 10,000 bankruptcy cases in Michigan and will apply this experience to your case as well. My office prides itself on fast, detailed, personal service. There are many different aspects to a bankruptcy case. Some of the different aspects are listed on the links below for you to explore. If you have any questions while exploring this site or would like a free personal bankruptcy consultation, contact my office at (313) 962-4656 or toll free 888-777-FILE.

 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.

We are a Debt Relief Agency helping people file for bankruptcy relief under the Bankruptcy Code. Let us help you decide if bankruptcy is right for you.

Bankruptcy attorney Walter Metzen represents clients throughout Southeast Michigan, including the communities of Detroit, Southfield, Warren, Roseville, Farmington Hills, Ann Arbor, Belleville, Canton, Clinton Township, Dearborn, Dearborn Heights, Hamtramck, Highland Park, Holland, Howell, Lincoln Park, Livonia, Macomb, Northville, Plymouth, Port Huron, Redford, Rochester, Saginaw, Southfield, Sterling Heights, Taylor, Trenton, Troy, Westland, Wyandotte, Ypsilanti, Mount Clemens, Howell, Oakland County, Macomb County, Wayne County, Washtenaw County, Livingston County, and all of the surrounding areas.

 


 

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