Michigan Bankruptcy Exemptions: What You Can Keep in Chapter 7
Michigan bankruptcy filers can choose between state and federal exemptions to protect their property. Homeowners benefit from Michigan's $46,125 homestead exemption, while non-homeowners often gain more protection using federal exemptions with their higher personal property limits and generous wildcard.
Get Free ConsultationFiling bankruptcy in Michigan doesn’t mean losing everything you own. Exemptions protect your property during Chapter 7. You keep what matters most.
Most Chapter 7 filers don’t lose anything when they file. Exemptions ensure you maintain a basic standard of living. You protect your home, car, and personal belongings.
Maximize Your Michigan Bankruptcy Exemptions
Choosing the right exemptions protects your home, car, and property during Chapter 7. Get personalized guidance to keep everything you're entitled to by law.
Speak With Attorney FreeChoosing Between State and Federal Exemptions
Michigan gives you a choice. You can use state exemptions or federal bankruptcy exemptions.
You must have lived in Michigan for at least two years. Then you pick the set that protects your property best.
You can’t mix and match. Choose one system and stick with it.
Michigan’s homestead exemption is higher at $46,125 versus $31,575 federal. But federal exemptions protect more personal property and vehicle equity.
If you choose Michigan exemptions, you can also use federal non-bankruptcy exemptions. These primarily protect retirement accounts.
Michigan Homestead Exemption
You can protect up to $46,125 of equity in your home. The amount increases to $69,200 if you’re 65 or older.
The exemption also applies if you have a disabled dependent.
Calculate your equity by subtracting your mortgage from your home’s value. If your home is worth $225,000 and you owe $190,000, you have $35,000 in equity. That’s fully protected under Michigan law.
Married couples filing jointly can’t double the homestead exemption. One exemption amount applies per household.
Michigan vs. Federal Homestead Protection
Michigan’s $46,125 homestead exemption beats the federal $31,575 limit. Homeowners benefit more from state exemptions.
Non-homeowners should consider federal exemptions instead. The federal wildcard exemption provides more flexibility.
Personal Property Exemptions in Michigan
You can protect essential items you need for daily life. Clothing, furniture, appliances, and household goods qualify.
Some items are fully exempt with no dollar limit:
- All clothing except furs
- All family pictures
- All professionally prescribed health aids
- Burial plots and burial rights
Household Goods and Furnishings
Michigan allows $700 per item up to $4,625 total. Federal exemptions are more generous at $800 per item up to $16,850 total.
Household goods include utensils, furniture, books, jewelry, and appliances.
Computers and Electronics
Michigan protects up to $800 in computer equipment and accessories. Federal exemptions include computers within the household goods category.
Tools of the Trade
You can protect up to $3,075 in tools you need for work. Federal exemptions include tools within household goods.
Pets and Farm Property
Michigan exempts up to $800 for household pets. Farm animals, feed, and crops receive $3,075 protection.
Federal exemptions include these items within household goods limits.
Motor Vehicle Exemption
Michigan protects up to $4,250 in car equity. Federal exemptions allow $5,025 in vehicle equity.
Calculate equity by subtracting your loan balance from the car’s value. A paid-off vehicle has equity equal to its full market value.
You may need the wildcard exemption to protect a paid-off vehicle. Federal exemptions work better for this situation.
If you’re considering bankruptcy and worried about keeping your car, speak with a bankruptcy attorney for free to review your options.
Wildcard Exemption
Michigan doesn’t offer a wildcard exemption. Federal exemptions provide $1,675 as a wildcard.
Non-homeowners get an additional $15,800 wildcard under federal law. You can use this to protect any property.
The wildcard covers items not protected by other exemptions. Bank accounts, tax refunds, and personal items qualify.
Retirement Accounts and Pensions
Most retirement accounts receive full protection under Michigan law. IRAs, 401(k)s, and pension plans are exempt.
Traditional and Roth IRAs are protected up to $1,512,350. Simple IRAs follow the same limit.
Exclude contributions made within 120 days before filing bankruptcy. These recent contributions may not qualify.
Protected pensions include:
- Police officers and firefighters
- Public school employees
- State employees
- Judges and probate judges
- Legislators
Wage Protection
Heads of household can protect 60% of earned but unpaid wages. You also get $15 per week plus $2 for each dependent.
Other filers can protect 40% of wages or $10 per week. Wage garnishments stop when you file bankruptcy.
Public Benefits Exemptions
Michigan fully protects these public benefits:
- Crime victims’ compensation
- Unemployment compensation
- Korean or Vietnam War veterans’ benefits
- Worker’s compensation benefits
- Welfare benefits
- Social Security benefits
Insurance Exemptions
Insurance benefits receive full protection regardless of amount. Life insurance policies are exempt.
Protected insurance includes:
- Life insurance proceeds and cash value
- Insurance proceeds held by insurers
- Fraternal society benefits
- Disability and health insurance benefits
- Employer-sponsored life insurance and trust funds
Doubling Exemptions for Married Couples
Married couples filing jointly can double most exemption amounts. Both spouses claim the same exemption category.
The homestead exemption is one exception. Only one homestead exemption applies per household.
Doubling exemptions significantly increases property protection. Married filers gain substantial advantages.
Which Exemptions Should You Choose?
Homeowners benefit from Michigan’s higher homestead exemption. You protect $14,550 more equity than federal limits.
Non-homeowners often prefer federal exemptions. Higher personal property limits and the wildcard provide better coverage.
Review your property carefully before deciding. List everything you own and its value.
Compare protection under each system. Choose the one that safeguards your most valuable assets.
A bankruptcy attorney can help you maximize exemptions. Professional guidance ensures you keep everything legally possible.
How Exemptions Work in Chapter 7
You claim exemptions when filing your bankruptcy petition. Schedule C lists all property you’re protecting.
The bankruptcy trustee reviews your exemptions. They verify you’re using correct amounts and categories.
Creditors can object to exemptions within 30 days. Objections are rare when exemptions are properly claimed.
Property covered by exemptions stays with you. The trustee can’t sell it to pay creditors.
Non-exempt property becomes part of the bankruptcy estate. The trustee may sell it and distribute proceeds to creditors.
Protecting Your Property During Bankruptcy
Accurate valuation is critical for claiming exemptions. Use fair market value, not replacement cost.
Fair market value means what a buyer would pay today. Don’t use retail prices or original purchase prices.
Document your property values with receipts or appraisals. Evidence supports your claimed exemptions.
Be honest and thorough on your bankruptcy forms. Hiding assets can result in case dismissal or criminal charges.
When to Consult a Bankruptcy Attorney
Complex property situations benefit from legal advice. High-value homes, businesses, or investments need careful planning.
An attorney maximizes your exemptions legally. They know strategies to protect more property.
Recent moves complicate exemption eligibility. Living in Michigan less than two years requires different rules.
If you’re ready to eliminate debt while keeping your property, speak with a bankruptcy attorney for free to explore your options.