Debt Relief Options in Michigan

Where do you go when you are in debt while living in Michigan? In this article you will find debt relief programs in Michigan and learn about the statute of limitations, and debt collection laws.

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Debt Statistics in Michigan







Debt Relief Programs in Michigan

For the residents of the Great Lake State there are a number of different banks, credit unions, online lenders, and debt-relief companies (for profit and nonprofit) that specialize in helping consumers pay off credit card debt.

Consumers have the choice between five types of programs to address problems with credit card debt. The programs include debt management programs, debt consolidation loans, debt settlement, nonprofit debt settlement and bankruptcy.

Here is a summary of the options for those struggling with debt in the state of Michigan.

Debt Management Program

One way to pay off high-interest credit card debt without having to take out a loan is participating in a debt management program. Lenders agree to reduce the credit card debt interest rate to around 8%, helping consumers pay off their debt in 3-5 years.

Where to find debt management programs: Nonprofit credit counseling agencies offer debt management plans. Creditors will work with the credit counselors in order to reduce interest rates and create an affordable budget that includes a line devoted to paying off debt. The program works on unsecured debts like credit cards, but not secured debts like cars or houses.

Who is right for debt management programs: If you have high interest credit cards, debt management programs may be the best option. Something to note is that these plans also require consumers to stop usage of credit cards as well as make on-time payments to eliminate the debt.

Debt Consolidation Loan

The goal of a debt consolidation loan is to combine high-interest credit card debts into a single monthly payment at a reduced interest rate, all coming from a single source.

Typically, debt consolidation loans consist of borrowing enough money from a credit union, bank, or online lender to pay off your entire credit card debt. A key factor in these types of loans is your credit score, which needs to be above 700 to qualify for the top rates. However, 670-699 can also get fair rates. Any score under 670 will likely involve a high interest rate.

Where to find debt consolidation loans: Another name for debt consolidation loans is a personal loan. Most credit unions, banks, and online lenders offer this type of loan if you meet the credit score requirement. In order to find the best loan terms and interest rates, make sure to look around and compare all options.

Who is right for a debt consolidation loan: If you have a credit score of 670 or preferably higher, as well as the discipline to halt all credit card usage, you would be a suitable candidate for this relief option.

Debt Settlement

Debt settlement allows the consumer to pay less than what was originally owed. This process can take 2-3 years. Many times, companies will claim that they are able to cut your debt in half. As enticing as it sounds, seldom is it true and many of the claims actually worsen your situation.

For example, many debt settlement companies ask you to stop making payments to the lender. Over the course of 2-3 years, which is a lot of late fee penalties and interest added to your account balance, making it more difficult to pay off the debt.

Another key factor when it comes to debt settlement is the negative impact on your credit report that will last seven years. Credit scores can drop more than 100 points. You should know that the IRS also considers $600 as income that must be declared on your tax return as forgiven debt.

Where to find debt settlement: Although it is possible to do it yourself, consumers typically hire a for-profit company that specializes in debt settlement. They are then able to negotiate on your behalf with credit card companies to arrive at a lump sum payment that satisfies the debt. Something to note: card companies are not obligated to accept these settlement offers.

Who is right for debt settlement: Consumers who have gotten to the point of not making payments on debt that has grown too large, are good candidates for debt settlement. This program is considered as a last option to avoid bankruptcy.

Nonprofit Debt Settlement

Nonprofit debt settlement is similar to for-profit debt settlement in that the goal is to pay less than what they owe.

The difference is that instead of negotiating a payment amount, creditors agree in advance to accept 50%-60% of what is owed to settle the debt.

It is not easy to qualify for this form of debt relief. Consumers must make on-time payments for 36 months with no leniency for missed payments. This program is accredited by the National Foundation for Credit Counseling (NFCC) and has a 0% interest rate for the debt.

Where to find nonprofit debt settlement: Since this program is new, there are only a few nonprofit credit counseling agencies offering it. In order to find these agencies, consumers should search online using the phrase “nonprofit debt settlement.”

Who is right for nonprofit debt settlement: Those who are facing large credit card bills and don’t have the income to pay them off are ideal for this program. This is a very attractive option because you pay 0% interest on your debt for 36 months.


Although bankruptcy should be the last option for those in debt, it may also be the best choice for some. Bankruptcy allows consumers to have a do-over in their finances while not losing many possessions in the process.

The two major types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 bankruptcy requires passing a “means test” which measures your income and compares it to the median for the states. In Michigan, those who will pass the means test must make less than$30,723.

Those who do not pass the means test are able to file for Chapter 13 bankruptcy. In Chapter 13, you are able to keep your assets in exchange for making regular payments to the court trustee in order to pay down the debt. This repayment plan typically lasts 3-5 years. At the end of the plan, any unsecured debts are discharged.

One thing to note is that the consequences for bankruptcy are severe. Your credit score may drop 100-200 points, depending on where it was when you started. Bankruptcy also stays on your credit report for 7-10 years, making it difficult to get a loan for a home or car during that time.

Where to file for bankruptcy: Bankruptcy needs to be filed at a federal bankruptcy court and the laws are complex, so consulting with an attorney before filing is recommended. If you feel that all of your other options have been exhausted and you are unable to pay off your debt within five years, bankruptcy may be the best option.

Statute of Limitations for Michigan

The “Statute of Limitations” for credit card debt is a law limiting the amount of time lenders and collection agencies have to sue consumers for nonpayment.

That time frame varies by state. According to Michigan law, creditors have up to 6 years to collect debt, including obtaining a judgment on the debt. However, by getting a judgment, your creditor can pursue collections indefinitely as long as they renew the judgment every 10 years.

Debt collectors can still try to collect debt after the statute of limitations expires, but can’t take you to court to get a judgment for it.

Stagnant debt does not necessarily mean that a creditor won’t try and continue collection efforts. Third party collection agencies can pursue a judgment to extend their collection timeframe and allow them to apply for garnishment.

A garnishment is an order directing a third party to seize assets, usually wages from employment or money in a bank account, to settle an unpaid debt. Though they are illegal in some US states, they are legal, with some regulations, in the state of Michigan.

Debt Collection Laws in Michigan

Debt collection agencies like to use high pressure tactics like threats of garnishments in order to elicit compliance. The U.S. has sanctioned different laws to protect consumers from debt collectors and some states have their own set of laws to protect their residents.

In Michigan, there are a few different laws to protect consumers who find themselves in financial peril. The Michigan Fair Debt Collection Practices Act prohibits collection agencies from harassing borrowers or using unfair or misleading tactics to collect debts.

This law also allows private remedies for consumers in order to create a victim recovery of actual damages or equitable relief. In addition to this, it provides for treble damages for willful violations, and allows for attorney fees for violations.

Debt Statistics for Michigan

Consumer Debt: In Michigan, the average consumer debt is $72,735, nearly $25,000 below the national average.

Mortgage Debt: The average Michigan resident carries $150,482 in mortgage debt which is ninth lowest among the 50 states.

Student Loan Debt: When it comes to student loan debt, Michigan residents are averaging $36,642, 18th highest in the country.

Auto Loan Debt: The average auto loan debt is $16,560, a 7.5% increase from the year before.

Credit Card Debt: Michigan is in the top 10 lowest credit card debt in the nation with an average of $4,692.

Average Credit Score: Michigan residents have an average credit score of 714, which matches the national average.

Bankruptcies and Foreclosures: Residents of the Great Lakes state are the ninth highest in the nation when it comes to bankruptcies and foreclosures, with 4,155 filed this past year.

Identity Theft: Michigan residents have the 21st lowest case rate among the other states with 20,556 cases filed in the last year.

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].


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