Most individuals in Michigan file under Chapter 7, which discharges qualifying debts after any non-exempt property is sold, or Chapter 13, which uses a three- to five-year repayment plan. Whether you can use Chapter 7 depends on the means test. You protect property through exemptions, and Michigan lets you choose either the federal list or the state list in MCL 600.5451. If you have a personal injury claim, it must be disclosed: a claim that exists when you file becomes property of the bankruptcy estate.
Chapter 7 and Chapter 13
| Chapter 7 | Chapter 13 | |
|---|---|---|
| How it works | A trustee collects and sells property that is not exempt and pays creditors | You keep your property and pay creditors through a court-approved plan |
| Length | A few months, in most cases | 3 years if your income is below the state median, up to 5 years; 5 years maximum if at or above it (11 USC 1322(d)) |
| Income test | The means test applies | Your income affects the plan length and payment |
| Common reasons to choose it | Mostly unsecured debt such as medical bills and credit cards, and little non-exempt property | Behind on a mortgage or car loan and want to keep it, or income too high for Chapter 7 |
Before filing under either chapter, you must complete a credit counseling briefing from an approved agency within the 180 days before you file (11 USC 109(h)). After filing, you must complete a personal financial management course to receive a discharge. A Chapter 7 discharge is not available if you received one in a case filed within the previous eight years (11 USC 727(a)(8)).
Filing triggers the automatic stay, which stops most lawsuits, garnishments and collection efforts on debts that arose before the case (11 USC 362(a)).
The means test
The means test decides whether a Chapter 7 filing by someone with mainly consumer debts is presumed to be an abuse (11 USC 707(b)).
- First, compare your income to the median. If your household’s current monthly income, multiplied by 12, is at or below the Michigan median for your household size, no one may bring a motion claiming the presumption of abuse (11 USC 707(b)(7)). The U.S. Trustee Program updates these medians; the current figures apply to cases filed on or after April 1, 2026.
- If you are above the median, a formula subtracts allowed expenses and payments from your income. If what is left over is large enough, abuse is presumed. You can rebut it only with special circumstances, such as a serious medical condition, that you document.
Exemptions: Michigan or federal
Exemptions decide what you keep. MCL 600.5451 allows a Michigan debtor to exempt either the property exempt under federal law or the property on Michigan’s own list. You choose one system.
- Michigan’s list includes a homestead exemption (higher if you or a dependent is 65 or older or disabled), household goods, one motor vehicle, tools of your trade, IRAs and qualified retirement plans, and property held by spouses as tenants by the entirety, except against joint debts. The dollar amounts are adjusted by the State Treasurer every three years.
- The federal list in 11 USC 522(d) includes a homestead exemption, a “wildcard” that can protect any property, and a specific exemption for a payment on account of personal bodily injury, up to $31,575 for cases filed on or after April 1, 2025. That exemption does not cover payments for pain and suffering or for actual financial loss.
Which list protects more depends on what you own, whether you are married and whether you have an injury claim.
Bankruptcy and a pending personal injury claim
- The claim belongs to the estate. The bankruptcy estate includes all of your legal or equitable interests in property when the case begins (11 USC 541(a)(1)). An injury claim from a crash or fall that happened before you filed is one of them, even if no lawsuit has been filed.
- In Chapter 13, later claims count too. Property you acquire after filing, while the case is open, is also estate property (11 USC 1306(a)(1)).
- You must schedule it. You must file a schedule of assets and liabilities (11 USC 521(a)(1)(B)(i)), and a potential cause of action is an asset that must be disclosed (Spohn v Van Dyke Public Schools, 296 Mich App 470 (2012)).
- The trustee may control it. In Chapter 7, the trustee may pursue the claim, settle it or abandon it back to you. Exemptions may protect part of the recovery, and the bankruptcy court may need to approve a settlement.
- Omitting it can cost you the claim. Courts have used judicial estoppel to bar people from pursuing claims left off their schedules. In Keathley v Buddy Ayers Construction (June 11, 2026), the U.S. Supreme Court held that a court must weigh the totality of the circumstances in deciding whether an omission was inadvertent. That is a fairer test, not a safe harbor.
If you are already in bankruptcy and then get hurt, or you have an injury claim and are thinking about filing, tell both your bankruptcy lawyer and your injury lawyer. If you already filed without listing a claim, the schedules can usually be amended.
If your debts come from a car crash, unpaid medical bills may be payable by a no-fault insurer before bankruptcy is the right answer. See when a no-fault claim is denied and settlement liens and taxes for how liens are handled in an injury settlement.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
Contact us to talk through your situation before you file.
Sources: 11 USC 109(h); 11 USC 362(a); 11 USC 521(a)(1); 11 USC 522(b) and (d); 11 USC 528; 11 USC 541(a)(1); 11 USC 707(b); 11 USC 727(a)(8) and (a)(11); 11 USC 1306(a); 11 USC 1322(d); MCL 600.5451; Spohn v Van Dyke Public Schools, 296 Mich App 470 (2012); Keathley v Buddy Ayers Construction, Inc., No. 25-6 (U.S. June 11, 2026).
Questions people ask us
What is the difference between Chapter 7 and Chapter 13?
Chapter 7 is a liquidation case: a trustee may sell property that is not exempt, and most qualifying debts are discharged within a few months. Chapter 13 is a repayment plan lasting three to five years, which lets you keep property and catch up on things like mortgage arrears.
Can I file bankruptcy while I have a pending injury claim?
Yes, but the claim must be listed on your bankruptcy schedules. A claim that existed when you filed becomes property of the bankruptcy estate, and in Chapter 13 a claim that arises during the case is included too. The trustee may have a say in any settlement.
Does Michigan let me choose the federal bankruptcy exemptions?
Yes. Michigan lets debtors choose either the federal exemptions in the Bankruptcy Code or Michigan’s own list in MCL 600.5451. You must pick one set, not mix the two.
What happens if I leave my injury claim off my bankruptcy papers?
You risk losing the claim. Michigan courts have applied judicial estoppel to bar people from pursuing claims they did not disclose in bankruptcy. In June 2026 the U.S. Supreme Court held that courts must look at the totality of the circumstances before deciding an omission was not inadvertent.