Most Filers Keep Everything They Own
The vast majority of people who file bankruptcy in Michigan keep all of their property. Federal and Michigan state law provide a set of exemptions — categories of property that are protected from the bankruptcy trustee. If your assets fall within these exemptions, they cannot be taken to pay your creditors.
What Are Bankruptcy Exemptions?
Exemptions are legal protections that shield certain property from being sold to pay creditors. Michigan allows filers to choose between the federal bankruptcy exemptions or Michigan's state exemptions — whichever set is more favorable. Your attorney will analyze both and recommend the best option for your situation.
What Property Is Typically Protected?
Under Michigan and federal exemptions, most filers can protect their primary home (up to the homestead exemption limit), one motor vehicle up to a certain value, household furniture and appliances, clothing and personal items, tools of the trade used for work, retirement accounts such as 401(k)s and IRAs (often fully exempt), and Social Security or disability benefits. In practice, most Chapter 7 filers in Michigan have no non-exempt assets at all — these are called 'no-asset' cases.
What Happens to Non-Exempt Property?
If you own property that exceeds the exemption limits — such as a second vehicle, a vacation home, or significant cash savings — the Chapter 7 trustee may sell that property and distribute the proceeds to creditors. If protecting non-exempt assets is important to you, Chapter 13 may be a better option, as it allows you to keep all property while repaying creditors through a structured plan.
Chapter 13 Protects All Your Property
Unlike Chapter 7, Chapter 13 does not involve any liquidation of assets. You keep everything you own and instead repay some or all of your debts through a 3 to 5 year court-approved plan. This makes Chapter 13 the preferred choice for people with significant non-exempt assets they want to protect.
Commonly Protected Property in Michigan
- Primary home (up to homestead exemption limit)
- One motor vehicle (up to exemption value)
- Household furniture and appliances
- Clothing and personal items
- Tools and equipment used for work
- 401(k), IRA, and other retirement accounts
- Social Security and disability benefits
- Life insurance with cash value (limited)
Exemption amounts are subject to change. Consult with Attorney Gutting for current figures and how they apply to your specific situation.