Michigan Bankruptcy Exemptions

Find out what property is protected by Michigan's bankruptcy exemptions.

February 28, 2017

Bankruptcy exemptions determine the type of property that you can protect when filing for bankruptcy. Every state has its own bankruptcy exemption laws that specify the type and amount of property that you can keep.

In a Chapter 7 bankruptcy, the trustee (the official appointed to manage your case) can sell property that isn't covered by an exemption. By contrast, in a Chapter 13 bankruptcy, you can keep your property if it's worth more than the exemption amount, but, you will have to pay your creditors for the nonexempt portion.

Choosing Between State and Federal Exemptions

When you file for bankruptcy you can use Michigan exemption laws to protect your property; however, federal exemption laws exist, too. Michigan residents can choose between the state or federal exemptions.

(To learn about the law establishing the legality of Michigan's exemptions, see blog post 6th Circuit Says Michigan Filers Can Use Bankruptcy-Only Exemptions.)

Michigan Exemptions and Married Debtors

Married debtors filing jointly can double most listed exemptions amounts, but not all. For instance, spouses are limited to one homestead exemption.

Common Michigan Exemptions

Some of the more commonly used Michigan exemptions are listed below. All law references are to the Michigan Compiled Laws (Mich. Comp. Laws) unless otherwise indicated.

Homestead Exemption

The homestead exemption protects the equity that you have in your residence up to $37,775. If you are over 65 or disabled, the limit increases to $56,650. The surviving spouse of the owner can claim the exemption. 600.5451(1)(m), (o).

Motor Vehicle Exemption

The motor vehicle exemption protects equity that you have in your vehicle up to $3,475. This exemption can only be applied to one vehicle. 600.5451(1)(g).

Household Goods and Personal Property

This exemption protects your household goods such as furniture, utensils, books, appliances, and jewelry valued up to $600 per item and $3,775 total. 600.5451(1)(c). In addition, you can keep:

  • all clothing, other than furs (600.5451(1)(a)(iii))
  • $650 in computer accessories (600.5451(1)(h)), and
  • all family pictures. (600.5451(1)(a)(i))

Pension and Retirement Accounts

Most pension and retirement accounts are completely protected with a few exceptions.

  • Individual Retirement Accounts and Annuities are fully protected with the exception of amounts that are contributed within the 120 days prior to filing for bankruptcy. 600.5451(1)(k).
  • Traditional, Simple, or Roth IRA’s are protected up to $1,283,025. (This amount is adjusted every three years. For the most recent figure, see Your Retirement Account in Bankruptcy.) 11 U.S.C. § 522(b)(3)(C)(n).
  • Education IRA’s are protected up to $6,425. 11 U.S.C. §541(b)(5)(c).
  • A pension, profit-sharing, stock bonus, or other qualified plan is fully protected with the exception of amounts contributed in the 120 days prior to filing. 600.5451(1)(l).

Wages

You can protect up to 60% of earned but unpaid wages for the head of household, and up to 40% for others. The head of household can keep at least $15 per week plus $2 per week for each dependent other than the spouse and $10 per week for others. 600.5311.

Insurance Benefits

Insurance benefits are fully protected regardless of the amount. 500.2207. Benefits paid on behalf of an employer are fully protected. 500.2210. Benefits paid by any stock, mutual life, health, or casualty insurance are also fully protected. 600.5451(1)(j).

Public Benefits

Public benefits are fully protected regardless of the amount received as follows:

  • crime victims’ compensation (18.362)
  • unemployment compensation (421.30)
  • Korean War veterans’ benefits (35.977)
  • Vietnam War veterans’ benefits (35.1027)
  • welfare benefits (400.63), and
  • worker’s compensation benefits (418.821)

Tools of Trade

Your interest in the tools, implements, materials, and other items necessary to carry on your profession, trade, occupation, or business is protected up to $2,525. 600.5451(1)(i).

Researching Exemption Statutes

This article includes the most commonly-used Michigan exemptions. Others might be available to you. Also, state exemptions change periodically so you should always check the exemption statutes before filing for bankruptcy.

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