Michigan Debt Management Bond

The Michigan Debt Management Bond is a type of surety bond required by the Office of Financial and Insurance Regulation. The bond amount can range from $25,000 to $100,000 and the cost of the surety bond is usually between 1% and 3% of the bond amount. Surety1 will shop its many markets to procure the right price at the right terms.

How to Get a Michigan Debt Management Bond

At Surety1.com we make it easy to obtain this surety bond. Our simple, three step process is:

1. Complete the easy to navigate and secure online application. ¹
2. Review the free, no obligation quote from one of Surety1’s professional surety bond agents, usually within one business day. ²
3. Sign some paperwork and pay the bond premium

Once these steps have been completed, the Michigan Debt Management Bond will be shipped to the bond applicant.
^{1 -The name of the applicant on the surety bond application must match exactly the full legal business name of applicant for the license.
2- Subject to underwriter approval, based on aggregate surety bond exposure, additional underwriting information may be required}

Surety1.com is a service of AssuredPartners one of the largest and fastest growing insurance agencies in the nation. Representing over a dozen surety bond companies, Surety1.com is the premier online provider of surety bonds nationwide since 2003.

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How is the Amount of the Surety Bond Calculated?

The primary factor is the total amount of Michigan clients’ funds in the debt manager’s trust account at the time of application or renewal. There’s a minimum and maximum limit set by statute:

• Minimum: $25,000
• Maximum: $100,000

Additional Bond Requirement (if applicable):

• An additional bond is required if the trust account is located outside of Michigan.
• This additional bond amount equals or exceeds 100% of the average monthly deposits held in the trust account over the previous year.
• To calculate the average monthly deposits, you add together the month-end balances of the trust account(s) from September 30th to October 1st of the prior year and then divide that total by 12

In summary, the standard calculation considers the current balance in the trust account, while the additional bond (if required) considers the historical average balance. The final amount is determined by the Michigan Office of Financial and Insurance Regulation. Confirm the required bond amount prior to applying. 

Who Needs This Bond?

Michigan has specific regulations around what constitutes a debt management company. According to the Michigan Debt Management Act, a debt management company is any entity that engages in “debt management” as defined by the act. This definition includes:

• Planning and managing the financial affairs of a debtor: This involves analyzing the debtor’s financial situation, creating a budget, and developing a strategy for paying off debt.
• Receipt of money from the debtor for distribution to creditors: The debt management company collects payments from the debtor and then distributes them to the creditors according to the agreed-upon plan.

However, there are some important exceptions to this definition. Not everyone who helps with debt management needs a Michigan Debt Management Bond:

• Certain Professionals: Certified public accountants, banks, credit unions, and similar entities are exempt if debt management is a secondary service related to their primary business.
• In-House Services: Employees or agents working for a licensed debt management company don’t need a separate bond.
• Court-Ordered Actions: If someone is acting under a court order to manage a debtor’s finances, they wouldn’t be considered a debt management company under this act..

So, to be considered a debt management company requiring a bond in Michigan, the entity needs to be specifically offering debt management services as defined by the act and collecting money from debtors to distribute to creditors.

How to Get a Michigan Debt Management License

Here are the requirements to obtain a Michigan Debt Management License:

1. Application Process:
   • Submit a written application to the Department of Insurance and Financial Services (DIFS) Consumer Finance Licensing Unit.
   • The application includes details about the applicant, including officers and directors for corporations.
   • Pay the required Fees
2. Financial Requirements:
   • Surety Bond: You’ll need a Michigan Debt Management Bond in the amount determined based on the total client funds in your trust account, with a minimum of $25,000 and a maximum of $100,000.
   • An additional bond might be required if your trust account is located outside of Michigan. This amount equals or exceeds 100% of the average monthly deposits in the past year.
   • Provide a credit report of the firm and an analysis of your budget
3. Business Documentation:
   • Attach relevant business formation documents like Articles of Incorporation or Partnership Agreements.
   • Include an Assumed Name Certificate if applicable .
4. Contractual Disclosures:
   • Submit copies of your debt management contract and creditor agreement forms that adhere to specific content requirements outlined in the Debt Management Act [3].
5. Additional Considerations:
   • You might need to submit a business plan and fee schedule depending on specific licensing requirements.
   • The DIFS website offers a Debt Management Initial Application Packet that includes all the necessary forms.
6. Exemptions Keep in mind that certain entities are exempt from licensure, including:
   • Certified public accountants providing debt management incidental to their accounting practice.
   • Banks, credit unions, and similar institutions offering debt management as part of their core services.
   • Title insurers or abstract companies handling escrow accounts.
   • Employees or agents working for a licensed debt management company.
   • Individuals acting under a court order for debt management.

Additional Resources:

• Debt Management – State of Michigan: https://www.michigan.gov/difs/industry/licensing-cf/debt-mgt
• Debt Management Initial Application Packet – State of Michigan: https://www.michigan.gov/difs/industry/licensing-cf/debt-mgt 
• DEBT MANAGEMENT ACT Act 148 of 1975

The information provided above is for general informational purposes only and does not constitute legal advice.  Do not rely solely on the information presented here as a substitute for professional legal counsel.