If you are planning to file for bankruptcy in Michigan, you might want to wait a few weeks. On April 1, 2014, the dollar amounts for some of the bankruptcy exemptions will increase. This means if you wait to file for bankruptcy until on or after April 1st, you can keep more property in Chapter 7 bankruptcy.
What Are Bankruptcy Exemptions?
If you file for Chapter 7 bankruptcy, your property becomes part of the bankruptcy estate. The bankruptcy trustee can sell your property and use the proceeds to repay your unsecured creditors. Some property, however, is safe from the trustee – this is called exempt property. (Learn more about the role of exemptions in Chapter 7 bankruptcy.) Each state has a list of property you can exempt in that state, usually up to certain dollar amounts.
In Chapter 13 bankruptcy, your exempt property plays a role in how much you must repay unsecured creditors over the life of your plan. So even though you keep your property in Chapter 13, being able to exempt most or all of your property is still advantageous to your case. (Learn more about the role of exemptions in Chapter 13 bankruptcy.)
Michigan Bankruptcy Exemptions
Like other states, Michigan law sets forth a list of property that you can protect if creditors are trying to collect from you. You can use these exemptions in bankruptcy as well. For a full list of Michigan bankruptcy exemptions (not all of them changed), see Nolo’s article Michigan Bankruptcy Exemptions.
Every three years the Michigan state treasurer adjusts the exemption dollar amounts to take into account inflation. The latest adjustment will go into effect on April 1, 2014. If you file for bankruptcy on or after April 1, 2014, the following exemption amounts will apply to your case:
- Household goods, furniture, utensils, books, appliance, and jewelry, up to $600 per item, but not to exceed a total of $3,775 for all items. (The previous amounts were $550 and $3,525 respectively.)
- Pew in a place of worship, up to $650 (previously it was $600).
- Crops, farm animals, and feed for the animals, up to $2,525 total (previously it was $2,350).
- Pets, up to $650 (previously it was $600).
- Motor vehicle, up to $3,475 (previously it was $3,250). (Learn more about the Michigan motor vehicle exemption.)
- Computer and accessories, up to $650 (previously it was $600).
- Tools of the trade, up to $2, 525 (previously it was $2,350).
- Homestead exemption to $37,775 (previously it was $35,300) or to $56,650 if you are 65 years old or disabled (previously it was $52, 925). (Learn more about the Michigan homestead exemption.)
You can find these exemption laws in the Michigan Compiled Laws Annotated §600.5451(1). However, the statutes do not reflect the adjusted amounts. You can find the Michigan bankruptcy exemptions adjusted for inflation on the Michigan Department of Treasury’s website.