Michigan bankruptcy exemptions: protecting property starts with the facts

The short answer

People often hear that Chapter 7 means losing everything, or the opposite claim that nobody loses property. Neither is a safe starting point. A bankruptcy estate generally includes broad interests in property. Exemptions allow an individual to protect qualifying interests under applicable law. Whether a particular asset is protected depends on ownership, value, liens, the available exemption system and other facts. An exemption is a legal claim made in the case, not a label you can attach informally to anything you need.

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A careful look

What an exemption actually protects

People often hear that Chapter 7 means losing everything, or the opposite claim that nobody loses property. Neither is a safe starting point. A bankruptcy estate generally includes broad interests in property. Exemptions allow an individual to protect qualifying interests under applicable law. Whether a particular asset is protected depends on ownership, value, liens, the available exemption system and other facts. An exemption is a legal claim made in the case, not a label you can attach informally to anything you need.

Michigan and federal systems

Michigan law permits an exemption choice in appropriate circumstances, and federal law also controls eligibility and limitations. A recent move between states may change which law applies, so a Michigan mailing address alone is not the whole analysis. In a joint case, spouses cannot simply mix incompatible systems to get every advantage of both. Counsel should compare the household’s actual property under the available alternatives. This article intentionally does not quote exemption dollar limits, because adjustments and filing-date rules must be checked before relying on a figure.

Home equity is not the home price

For a homeowner in Livonia or another Wayne County community, the useful starting records are the deed, current mortgage payoff, property-tax statement and a reasonable market-value estimate. Ownership shares and liens affect the analysis. A large mortgage payment does not necessarily mean there is no equity, and a high property value does not necessarily mean a sale will occur. Do not transfer a deed to a relative to solve the issue yourself. Transfers can create disclosure, recovery and discharge problems rather than protect the home.

Vehicles and household items

A car review considers ownership, current value, liens, insurance and the financing agreement. Protecting eligible equity does not force a lender to forgive its security interest or allow missed payments indefinitely. Household goods also need honest disclosure and realistic values; their used resale value is different from the cost of buying everything new. List valuables separately when appropriate. Tools, collectibles, jewelry, business equipment and digital assets should not disappear from your inventory simply because they are harder to describe or you believe nobody would want them.

Retirement accounts need a separate review

Many qualifying retirement interests may be excluded from the estate or protected by exemptions. The account type, tax status, ownership and distribution history matter. An inherited account is not necessarily treated like your own retirement savings. Taking money out before obtaining advice can change the form of the asset and create tax or protection questions. Gather plan statements and records of recent withdrawals or rollovers. Do not assume that using retirement funds to pay ordinary unsecured debt is safer than discussing bankruptcy first.

Refunds and claims are assets too

An expected tax refund, a legal claim, a right to an inheritance or money someone owes you may be relevant even when there is nothing physical to point to. Tell pounsel about pending insurance claims, lawsuits you could bring, and interests held with other people. Property can have uncertain value and still require disclosure. The schedules are not limited to items listed on a credit report. A complete inventory allows the exemption analysis to happen before filing, when it can inform the decision rather than surprise everyone later.

Why no generic exemption checklist is enough

MCL 600.5451 contains categories, limitations and an adjustment mechanism; section 522 adds federal requirements and restrictions. A chart without context may omit a recent move, a lien, a joint debt or a timing issue. Ask your lawyer which system is proposed, why it fits your property and which interests may remain exposed. Keep copies of the final schedules and report changes or omissions promptly. Accurate disclosure and an individualized comparison are more useful than a promise that a particular possession is automatically safe.

Preparing for a conversation with the firm

Wendy Turner Lewis has been in private practice for over 25 years. A free 30-minute consultation by Zoom or phone is a chance to discuss your priorities, urgent dates, income, property and debts. Gather the paperwork connected to the issue in this article, then add a complete household picture. The document checklist explains which records to gather, including the difference between six-month means-test preparation, federal payment-record duties and local document requirements. Do not ignore an existing court deadline while waiting for a consultation.

What the advertised fee includes and excludes

Chapter 7 attorney fee: $1,300. Reaffirmation agreement hearings are included in the $1,300 attorney fee. Payment plans available on the attorney fee. In Chapter 7, the attorney fee is generally paid before the case is filed, so plans are arranged before filing. The $338 court filing fee is paid separately. The $1,300 does not include credit counseling or debtor-education course fees or services, or adversary proceedings. The attorney and court fees total $1,638 before excluded items. The written engagement agreement confirms scope and any additional charges. Credit counseling and the post-filing education course are separate requirements for most individual filers; confirm the correct approved provider and its current charge before enrolling. Payment plans are available on attorney fees and arranged before filing; Chapter 7 attorney fees are generally paid before filing. Court-fee installments or a waiver require court approval and do not waive attorney fees. The cost tool lets you add course quotes without inventing a price.

A secure, informed next step

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Wendy Turner Lewis, PLLC

Detroit bankruptcy practice · in private practice for over 25 years. Approved educational content by Wendy Turner Lewis.

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