Exemptions in a Michigan Bankruptcy

Understanding Personal Property Exemptions in Southfield, MI

Individuals in bankruptcy can exempt certain kinds of property from the bankruptcy estate under either the Federal Exemptions or the State Exemptions. A bankruptcy personal property exemption permits persons who file for bankruptcy to protect specific types of property up to a certain amount. This may include household objects, clothes, a vehicle, or even personal real estate. The intention is to keep people from losing everything through bankruptcy. Exemptions vary by state.

Our Southfield personal bankruptcy attorneys have taken the time to indicate all Federal and State exemptions in Chapter 7 or Chapter 13 bankruptcies so that you may use it to your advantage.

Our bankruptcy attorneys at Goldstein Bershad and Fried, PC can help you determine what exemptions you qualify for as well other legal help specific to your needs, call our Southfield offices at (248) 213-7888 for a free consultation.

Federal Bankruptcy Exemptions

Residence: $23,675 of the Debtor's equity in a primary residence. Up to $10,825 of unused residence exemption may be used to exempt any property. This "excess residence" exemption is often used to shield non-exempt property. Important: under the state exemptions, all the equity in any entireties property (titled in the name of husband and wife) may be exempt without limit.
Motor Vehicle: $3,375 of the equity in one motor vehicle.
Household Goods: $12,625 in aggregate (not to exceed $600 in any particular item) of the following property held primarily for personal, family or household use: household goods, wearing apparel, appliances, books, animals, crops, musical instruments. Under the state exemptions, all clothes (furs and all) are exempt but household furniture is limited to only $3,000.
Jewelry: $1,600 in jewelry.
Wild Card: $1,250 in any property. This "wild card" exemption can be combined with up to $11,850 of the unused residence exemption to shield any non-exempt property.
Tools of the Trade: $2,375 which includes tools used in the course of someone's business or trade.
Term Insurance: Any unmatured life insurance contract. Usually ignored by trustees unless it "matures" during the bankruptcy. Important: Bankruptcy estate includes insurance proceeds payable to the debtor within 180 days after filing Petition.
Whole Life Insurance: $12,625 in loan value of a policy owned by Debtor on the life of Debtor or dependent. Under the state exemptions, all the cash surrender value of all policies may be exempt if spouse or children are beneficiaries.
Disability Insurance: The right to receive disability, illness or unemployment benefits.
Alimony: To the extent necessary for the support of Debtor and dependents.
Retirement Plans: Payment under a stock bonus, pension, profit-sharing, annuity or similar plan, or contract, on account of illness, disability, death, age or length of service, but only to the extent necessary for the support of the debtor and debtor's dependents. Remember, qualified ERISA plans may have been excluded from the bankruptcy estate in the first instance. Under state exemptions, most retirement plans are totally exempt.

Certain kinds of property are exempt from collection by judgment creditors and can be excluded from the bankruptcy estate under the State Exemption laws.

Michigan State Bankruptcy Exemptions

In a Michigan bankruptcy, debtors can choose to use either state of federal exemptions for protecting their assets. In Chapter 7 bankruptcy, any non-exempt property must be turned over to a trustee to be liquidated. Therefore, it's important to chose the system that will offer you the best protection for your assets.

Real Estate: Real estate in the names of both husband and wife as tenants by the entirety is exempt from the individual creditors of the individual spouse BUT NOT from joint creditors. Unlike the federal exemptions, this is not limited to a residence but includes all entireties property from commercial buildings to raw land. If the real estate is a home, then there is an additional homestead exemption of $37,775. If the debtor is 65 or older or disabled, then the homestead exemption is $56,650.
Personal Property: The following personal (non-real estate) property owned jointly by husband and wife is exempt from the individual creditors of the individual spouse BUT NOT from joint creditors: bonds, certificates of stock, mortgages, promissory notes, evidence of indebtedness. Joint bank accounts are not "evidence of indebtedness" and are not protected by the statute. It is presumed that each spouse owns ½ of the bank account.
Motor Vehicle: $3,475 in one motor vehicle.
Household Goods & Jewelry: $3,775 of household goods, furniture, utensils, books, appliances, and jewelry, not to exceed $450 for any one item.
Tools of the Trade: $2,525 of tools, materials and other personal property necessary to earn a living.
Disability Insurance: Benefits paid by any stock or mutual life or health or casualty insurance company, on account of disability due to injury or sickness of any insured person.
Retirement Plans: With qualifications, includes most IRAs, plans qualified under §401 of the Internal Revenue Code subject to ERISA (pension, profit-sharing, stock bonus, etc), and annuities under §403(b), except for contributions within 120 days of filing bankruptcy.
Life Insurance: Generally, the cash surrender value of all policies owned by the debtor and payable to the spouse or children will be exempt.

For answers pertaining to specific bankruptcy matters, call Goldstein Bershad and Fried, PC at (248) 213-7888 or use our contact form to schedule a consultation with our Southfield law firm.