June 26, 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.
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.)
Married debtors filing jointly can double most listed exemptions amounts, but not all. For instance, spouses are limited to one homestead exemption.
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.
The homestead exemption protects the equity that you have in your residence up to $38,225. If you are over 65 or disabled, the limit increases to $57,350. The surviving spouse of the owner can claim the exemption. 600.5451(1)(m), (o).
The motor vehicle exemption protects equity that you have in your vehicle up to $3,525. This exemption can only be applied to one vehicle. 600.5451(1)(g).
This exemption protects your household goods such as furniture, utensils, books, appliances, and jewelry valued up to $600 per item and $3,825 total. 600.5451(1)(c). In addition, you can keep:
Most pension and retirement accounts are completely protected with a few exceptions.
You can protect up to 60% of earned but unpaid wages for the head of household or $15 per week plus $2 per week for each dependent other than the spouse. Others can protect up to 40% or $10 per week. 600.5311.
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 are fully protected regardless of the amount received as follows:
Your interest in the tools, implements, materials, and other items necessary to carry on your profession, trade, occupation, or business is protected up to $2,550. 600.5451(1)(i).
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.