What Kind of Property Can I Keep in Bankruptcy?
Making the decision to file for bankruptcy can be a difficult one. You may be unsure of how your financial situation will appear in a post-bankruptcy life. It is reasonable to fear for the forfeiture of your possessions. Anyone who petitions for bankruptcy however, is eligible for exemptions that allow you to maintain specific properties. Fortunately, Michigan residents have more options than most when it comes to exemptions. Michigan is one of seventeen states that allows its residents to choose between the state law exemptions and the federal law exemptions.
Michigan State Exemptions
Michigan’s state exemptions include several categories: homestead, insurance, pensions, personal property, public benefits, tools and wages. If you have equity within these categories, such as a home or vehicle, only your current amount of equity in the item can be protected. Homestead includes a single property, exempt to a certain amount. If the owner of the property has passed away, their spouse or child can claim the homestead exemption. The insurance category covers benefits from plans such as health, disability, life, mutual life, fraternal benefits, and certain annuities that are specifically barred from being collected by creditors.
The pensions category covers the retirement plans of judges, firefighters, police officers, public school employees and state employees. It also covers ERISA-benefits, along with your IRA. Personal property is exempted up to a limit amount for different items, which include household items, appliances, furniture, clothing, pictures, and burial plots. If you did not claim the homestead exemption, you may claim building loans up to $1000.
Certain animals and grains, along with food and fuel from the last six months can be exempt if you are the head of the household. Public benefits are exempt if they are compensation for unemployment, crime or workplace injury, social welfare, ADFA benefits, and veteran benefits for the Vietnam War, Korean War, and World War II. Tools needed to make a reasonable living are also exempt. Lastly, earned wages that are unpaid are exempt up to 60%. A head of the household can exempt an additional $15 plus $2 for every dependent per week, and others may exempt $10 per week.
When choosing the Michigan state exemptions, you are also granted some federal supplementary exemptions. These exemptions cover retirement plans for civil service, CIA, foreign service, or military service employees, social security and veteran benefits. Survivor’s benefits, which entail a widow or widower to their deceased spouse’s social security, are exempt if you are a judge, a court or judicial director, a justice administrator, in the military, or a lighthouse worker. Other exemptions cover military life insurance, unemployment insurance for railroad workers, wages for seamen, and up to 75% of earned and unpaid wages for particular low income cases.
Your other option when filing bankruptcy is to choose the federal exemptions. By doing so, you are waiving your right to use both the Michigan exemptions, and the federal supplementary exemptions. These exemptions cover physical items such as your homestead, motor vehicle, trade tools, jewelry and health aids. Insurance and benefit plans incorporated are life insurance, social security, unemployment, welfare and veteran and disability benefits. Compensation for a workplace injury and crime victimization is included. Retirement accounts, education IRAs, and spendthrift trusts, where an independent trustee is placed in charge of the trust, are all protected. Finally, federal exemptions allow for $1,250 of wild card money, plus limited leftover homestead exemption money, to apply to other categories. This wild card exemptions can allow you to exceed the exemption limits in certain categories, or can be used to protect cash and bank accounts.
Contact VanderBroek Law Offices If you need to file for bankruptcy and wish to understand which set of exemptions are suitable for you.