Bankruptcy is a word that often evokes negative images of a hopeless financial future. Although filing for bankruptcy is a humiliating experience, it can be a necessary evil to accept when faced with crippling debt, a sudden job loss, or a debilitating injury.

Since the state of Michigan has the highest unemployment rate in the nation, you should know that if you are considering filing for bankruptcy, you are not alone.

Now, first things first. To be eligible to file, you must have resided in the state of Michigan for a period of more than 6 months. If this applies to you, then you should consider which division of the federal bankruptcy court you want to pursue, Chapter 7 or Chapter 13.

Chapter 7 or Chapter 13?

It is important to know the differences between the two types of bankruptcy before you file. Traditional Chapter 7 bankruptcy is essentially a liquidation of all your non-exempt assets and property. The appointed bankruptcy trustee will convert your assets to cash, pay creditors, and allow you to start over. If you have no assets, this approach generally forgives most of your debt.

Chapter 13 bankruptcy is called a reorganization. If you still have a job or predictable income, Chapter 13 allows you to work out a longer-term debt repayment schedule (3 to 5 years) that will allow you to keep your assets and property while reducing some of your debt obligations. With recent changes in the law, it has become more difficult to file Chapter 7 as many people with serious debt still have gainful employment, so it is best to contact a bankruptcy attorney to help you determine which approach would be the best for you.

Once you have determined which bankruptcy division you can legally file for, follow the steps below to be on the right path to relief from your financial burdens.

Where to File in Michigan

For your convenience, there are two bankruptcy court districts in the state of Michigan, the Eastern District and the Western District. Each district also has offices that serve specific counties. For example, if you live in Jackson, Lenawee, Macomb, Monroe, Oakland, St. Clair, Sanilac, Washtenaw, or Wayne, your Eastern District court address is 211 West Fort Street in Detroit. If you live in Genesee, Lapeer, Livingston, or Shiawassee County, go to 226 West Second Street in Flint. Finally, if you live in the Upper Northeast Michigan, the office you will need to attend is at 111 First Street in Bay City. For more information on hours, rules, or to download court forms, see the official website of the Eastern District Court.

The Western District of Michigan has five courtrooms located in Grand Rapids, Kalamazoo, Lansing, Marquette, and Traverse City, respectively. For the specific address of the court office in your county, see the official website of the Western District Court. Keep in mind that all of the legal forms you will need are also available online, so be sure to save handling time by printing and completing them before heading to the courtroom.

Steps towards bankruptcy

1. Visit your local bankruptcy court. Make a list of all your assets and liabilities, as well as a schedule of your current income and expenses, including those that are revolving like household bills. Also be sure to make a full disclosure of all your investment or retirement accounts. Not everything is legally subject to loss, but you must report any and all sources of wealth or income to the federal government.

2. Give short copies of your tax returns for the past few years, as well as a copy of all your bank statements.

3. Attend a federally approved credit counseling session. Be sure to keep the certificate of completion you will receive from the assessor, as you cannot file bankruptcy in Michigan without it.

4. Get all the required bankruptcy forms from the court (or download them from their website) and fill them out very carefully. Take note of any special instructions that indicate what documents or copies you will need to include in your bankruptcy petition. Remember, if you find this part confusing, you may want to retain the services of a Michigan bankruptcy attorney to handle all of the paperwork.

5. Take your forms to the local US Bankruptcy Court along with your payment. (At the time of writing, Chapter 7 and Chapter 13 in Michigan cost less than $300, respectively.) If you do not have the funds to pay the fee, the court may allow you to pay it in installments.

6. When you get notice of your 341 hearing (a meeting of creditors you owe money to), be sure to attend. Creditors may try to oppose your filing, but if you have been honest with the court from the beginning about your financial circumstances, the court should allow the bankruptcy to proceed.

7. Be on the lookout for any other notices from the court that may require your presence at a hearing. You may only need to go to court one more time for the bankruptcy to be complete, but you never know, so be sure to pay attention to all the letters you receive from the court.

Above all, keep your head up and understand that tens of thousands of people each year need to go through this process to start anew. Good luck!