Bankruptcy

Can I Keep My Property If I File for Bankruptcy in Michigan?

By Cara O'Neill, Attorney
Learn about bankruptcy exemptions in Michigan.

June 26, 2017

Many people who file for bankruptcy in Michigan will be able to protect (exempt) most of the property that they own—if not all of it. You’ll find the law listing the assets that you’ll be able to keep in the Michigan exemption statutes.

Michigan Exemption Statutes

People who file for bankruptcy in Michigan have the benefit of choosing between two lists—the state exemption scheme and the federal exemption list. A filer must pick one or the other—the law doesn’t allow for mixing and matching between the two. Instead, you’ll determine which system offers more property protection.

If you choose the Michigan scheme, you’ll be able to supplement with the federal “nonbankruptcy” exemptions. The nonbankruptcy exemptions allow you to protect valuable assets, such as wages, your retirement, and significant public benefits. Also, spouses who file together can each claim the exemption amount and apply it to property owned by the claiming spouse, with the exception of the homestead and pew exemptions.

Exempting Assets: The Process

To keep your property in bankruptcy, you must take steps to claim it. On official form Schedule C: The Property You Claim as Exempt, you’ll list everything you own that is protected by an exemption statute.

Nonexempt property—assets that the exemption law doesn’t cover—get sold in a Chapter 7 bankruptcy and the bankruptcy trustee distributes the funds to creditors.

The rules are different in a Chapter 13 case. Although you can keep nonexempt property, you’ll have to pay for it in a three- to five-year repayment plan. (For more information, read Choosing the Type of Bankruptcy: Chapter 7 or 13.)

Property That You Can Protect Under Michigan Law

You’ll find some of the most frequently-used state exemptions below and on the Michigan Legislature website.

Homestead

  • Homestead—$38,225 of equity in your primary residence; this amount increases to $57,350 if you are a senior citizen or person with a disability; surviving spouse of the property owner can claim the exemption. (§§ 600.5451(1)(m), (o))
  • Tenancy by entirety—if you and your spouse hold your property as tenants by entirety, your equity might be protected from creditors; because the bankruptcy filing type could impact this protection, it is strongly suggested that you seek counsel before moving forward. (§§ 600.5451(1)(n), 600.6023a)

Wages and Support

  • Earnings—40% of your wages or $10 per week, whichever is greater; if you are the head of the household, the amount increases to 60% or $15 per week, whichever is greater, plus $2 per dependent. (§ 600.5311)

Household Furnishings, Jewelry, and Clothing

  • Wearing apparel—all clothing other than furs. (§ 600.5451(1)(a)(iii))
  • Household goods and jewelry—$3,825; includes furniture, kitchenware, appliances, books, and jewelry; $600 per item limit. (§ 600.5451(1)(c))
  • Food and fuel—six-month supply. (§ 600.5451(1)(b))
  • Household pets—$650. (§ 600.5451(1)(f))
  • Computer—$650 (including accessories). (§ 600.5451(1)(h))

Motor Vehicle

  • Motor vehicle—$3,475. (§ 600.5451(1)(g))

Tools of the Trade

  • Tools of the trade—$2,550 worth of items necessary in your trade or profession. (§ 600.5451(1)(i))

Retirement Accounts, Pensions, and Other Benefits

  • World War II veterans’ benefits (§ 35.926)
  • Korean Veterans’ Military Pay Fund (§ 35.977)
  • Vietnam veterans’ benefits (§ 35.1027)
  • State employee retirement benefits (§ 38.40)
  • Firefighter and police officer benefits (§ 38.559)
  • Legislator retirement benefits (§ 38.1057)
  • Public school employee retirement benefits (§ 38.1346)
  • State police retirement benefits (§ 38.1643)
  • Judges’ retirement benefits (§ 38.2308)
  • Family support subsidy payments (§ 330.1158a)
  • Welfare benefits (§ 400.63)
  • Workers’ compensation benefits (§ 418.821)
  • Unemployment compensation (§ 421.30)
  • IRA or annuity— other than amounts contributed within 120 days of filing or the portion subject to a family law order. (§ 600.5451(1)(k))
  • Pension, stock bonus, or profit-sharing plan—other than amounts contributed within 120 days of filing or the portion subject to a family law order. (§ 600.5451(1)(l))

Insurance

  • Insurance benefits (§ 500.2207)
  • Insurance benefits paid on behalf of employer (§ 500.2210)
  • Insurance proceeds held by insurer (§ 500.4054)
  • Fraternal society benefits (§ 500.8181)
  • Mutual life, health, or casualty insurance benefits—includes stock. (§ 600.5451(1)(j))

Miscellaneous

  • Crime victim compensation (§ 18.362)
  • Burial plot and burial rights (§§ 128.112, 600.5451(1)(a)(iv))
  • Certain partnership property (§ 449.25(2)(c))
  • Milk and cream sale proceeds (§ 600.4031)
  • Family pictures (§ 600.5451(1)(a)(i))
  • Arms and other items required by law (§ 600.5451(1)(a)(ii))
  • Prescribed health aids (§ 600.5451(1)(a)(v))
  • Pew, seat, or slip—$650; spouses cannot double. (§ 600.5451(1)(d))
  • Crops, farm animals, and feed—$2,550. (§ 600.5451(1)(e))

This list is not exclusive. Other exemptions exist. Additionally, the law is subject to conditions that you must meet and changes periodically (the next change is scheduled to occur on April 1, 2020). You should verify this list independently to ensure accuracy and compliance, or meet with a local bankruptcy attorney.

Questions for Your Attorney

  • Do I qualify for a discharge in a Chapter 7 bankruptcy?
  • What will happen if I can’t afford to pay for my nonexempt property in a Chapter 13 case?
  • Would filing for Chapter 7 or Chapter 13 be a better choice for me?
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