SSI can usually be free of garnishment for almost all matters. Not being from Michigan, I have never dealt with the "drivers responsibility fee" issue.
I was able to find website from a licensed Michigan attorney that addressed that situation.
Russell Law Firm PC (located in Grand Rapids) states that the fee is dischargable as follows:
"Fortunately, Michigan driver’s responsibility fees are generally dischargeable in Chapter 7 bankruptcy, as well as Chapter 13 bankruptcy.
Criminal penalties are not dischargeable in bankruptcy. However, Michigan driver’s responsibility fees are not “criminal penalties.” They are administrative fines levied by the Secretary of State’s office, not as a sentencing judgment or criminal statutory penalty by a criminal court conviction. Therefore, they should not fall under the “criminal penalty” non-dischargeability exception to the list of debts dischargeable under the US Bankruptcy Code as traffic tickets, parking tickets, and other fines may."
Verify the information by contacting a bankruptcy attorney in your area. It looks like you may be on the right track..
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I believe that the secretary of state will allow you to pay the driver
responsibility fee with monthly payments. You can get your driver license
back upon execution of the payment plan. My opinion is that those fees are
not dischargeable in bankruptcy.
Patrick M. O'Reilly
Attorney at Law
12845 Farmington Rd.
Livonia, Mi 48150
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Short answer is yes, you can discharge the responsibility fee in a chapter 7. What I'm wondering is how/why you owe $1,600.00? The driver responsibility fee or an OUIL, what you said you plead to, is $500/year for 2 years, or $1,000.00 total, plus the $125 reinstatement fee. I checked the SOS website, and since April of this year, there seems to be an ability for you so reapply for an installment payment agreement. Check this link http://www.michigan.gov/documents/driverresponsibility/PublicAct203DriverResponsibility_416299_7.pdf
There it says that you can be reinstated 3 times per assessment, meaning that you have two more shots to try an installment agreement. It could be worth a shot to call again and talk to a different person, and mention the act referenced above in that link.