Category Archives: Bankruptcy Exemptions

abcd

When to use Emergency Bankruptcy Filings.

If you are facing a financial crisis — such as a foreclosure, auto repossession, garnishment or court judgment — you may not have a lot of time to protect yourself from devastating consequences. An emergency bankruptcy filing may solve the immediate problem and give you the breathing room you need.

Prevent Foreclosure, Repossessions And Garnishments In Michigan

When you file bankruptcy, you are protected by the “automatic stay.” The automatic stay requires creditors to put an immediate stop to all debt collection efforts. The following are examples of creditor actions that can be stopped when you file bankruptcy:

  • Home foreclosure: Filing bankruptcy will stop the foreclosure and give you time to decide whether to keep the home or give it up.
  • Auto repossession: Filing bankruptcy will stop a repossession. As long as the car has not been sold, you can get it back.
  • Harassing phone calls: Once you file bankruptcy, creditors cannot call you or your employer.
  • Lawsuit judgments: Filing bankruptcy puts an immediate stop to collection of lawsuit judgments.
  • Wage garnishments: Filing bankruptcy will stop the garnishment. If you act soon enough, it may allow you to get garnished wages back.
  • Bank account garnishments: Filing bankruptcy will stop the garnishment. If you act soon enough, it may allow you to get your money back.

Call Firebaugh and Andrews we handle emergency bankruptcy filings in Michigan, call us today for your free consultation. 734-722-2999

all

Protecting Your Assets in Bankruptcy: Michigan Property Exemption Laws

Property you get to keep*

The law of what has come to be called “Asset Protection” is actually a mixture of laws that allow you to keep certain property no matter what, even if you owe money to others. Every state has laws that designate specific property you get to keep so that you can continue living a productive life. That is, even if you owe a trillion dollars to someone, the law won’t make you sell the shirt off your back to pay it. And in Texas and Florida, they won’t even make you sell your million dollar mansion, or in Nevada, your gun.

These rules are called “property exemptions.” They vary from state to state. They designate what property is off limits to your ‘creditors ‘– the legal name for those who claim you owe them money.

Citations to exemptions

When you fill out your bankruptcy forms  you will be asked what property you claim as exempt — and a citation of the law that allows it.

This page gives you those citations and gives a brief summary of the exemption.

The help topics on the right provide additional information.

It is up to you to apply the correct citation to your property. If you have any questions, consult an attorney. If you own real estate, you should consult with an attorney about how the exemptions apply to your property.

a1

Continue reading

Justice

Michigan Personal Property Exemptions

This category covers your car, your non-retirement bank accounts, and most of your other personal possessions, other than your house.

States vary widely on how generous they are in this area. Some exemptions may be for any combination of property up to an aggregate amount. Other exemptions apply only to specific items, such as jewelry.

Remember that an exemption will not protect your car from being repossessed by the holder of the car loan you used to purchase the vehicle if you pledged the vehicle as security for the loan. To keep the car, you will have to pursue other options such as ‘redemption’ or ‘reaffirmation.’

As always seek professional advice, call Firebaugh and Andrews at 734-722-2229 for your free evaluation.

Michigan Exemptions

  • 1 Computer & accessories to $650
    Mich. Comp. Laws § 600.5451 (1)(h)
  • 1 Motor Vehicle to $3,475
    Mich. Comp. Laws § 600.5451 (1)(g)
  • Appliances, utensils, books, furniture, & household goods, to $600 each, to $3,775 total
    Mich. Comp. Laws § 600.5451 (1)(c)

Continue reading

abb

Special Rules for Retirement Accounts:

Under a new provision of the bankruptcy law, enacted in October 2005, virtually all types of pension and retirement accounts recognized by the IRS are completely exempt regardless of what state you live in.

This provision exempts “retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under Sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code.”

This list covers 401(k)s, 403(b)s, profit-sharing and money purchase plans, IRAs (including SEP and SIMPLE plans), as well as defined-benefit plans.

The exemption applies whether you rely on the list of federal bankruptcy exemptions (11 U.S.C. 522(d)(12)) or the exemption laws of your own state (See 11 U.S.C. 522(b)(3)(C)). Section 522(b)(4) spells out the specific requirements for qualifying under these provisions.

Continue reading

adebt

Will Filing A Michigan Bankruptcy Wipe Out All My Debts?

Yes, with some exceptions. Bankruptcy will not normally wipe out:

(1) money owed for child support or alimony, fines, and some taxes;(2) debts not listed on your bankruptcy petition;(3) loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;(4) debts resulting from “willful and malicious” harm;(5) student loans owed to a school or government body, except if:– the court decides that payment would be an undue hardship;(6) mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).

 

aps

Can You Keep Your Car If You File Bankruptcy?

Many people who file for bankruptcy and own a car are allowed to keep it during and after their case, especially if it is used for getting to and from work.

If you are behind on car payments, you may be able to use bankruptcy laws to keep your vehicle in your possession.

Both types of personal bankruptcy address cars, car loans and vehicles you own outright:

  • The automatic stay in bankruptcy is designed to stop repossession. In most cases, this goes into effect right after you officially file for bankruptcy.
  • Chapter 7 bankruptcy exemptions may protect your car from a forced sale.
  • Filing for bankruptcy under a Chapter 13 may allow you to repay your car loan at a more affordable rate so that you don’t lose your car to collectors.

Call Firebaugh & Andrews today for a free consultation 734-722-2999

Common Michigan Exemptions

Some of the more commonly used Michigan exemptions are listed below. All law references are to the Michigan Compiled Laws unless otherwise indicated.

Note: The dollar amounts for many of the below exemptions will change on April 1, 2014. It may take several days to update this article. To get up-to-date dollar figures that will apply if you file your bankruptcy case on or after April 1, 2014, see Michigan Bankruptcy Exemption Amounts to Increase on April 1, 2014.)

Homestead Exemption

The homestead exemption protects the equity that you have in your residence up to $37,775 (if you are over 65 or disabled the limit is $56,650). 600.5451(1)(n).

Motor Vehicle Exemption

The motor vehicle exemption protects equity that you have in your vehicle up to $3,475. This exemption can only be applied to one vehicle. 600.5451(1)(g).

Household Goods and Personal Property

This exemption protects your household goods such as furniture, utensils, books, appliances, and jewelry valued up to $600 per item and $3,775 total. 600.5451(1)(c). In addition:

There is no limit as to the amount of clothing that you can keep. 600.5451(1)(a)(iii).
Computer accessories are protected up to $650. 600.5451(1)(n).
There is no limit to the amount of family pictures that you can keep. 600.5451(1)(a)(i).

Pension and Retirement Accounts

Most pension and retirement accounts are completely protected with a few exceptions.

Individual Retirement Accounts and Annuities are fully protected with the exception of amounts that are contributed within the 120 days prior to filing for bankruptcy. 600.5451(1)(l).
Traditional, Simple, or Roth IRA’s are protected up to $1,245,475. (This amount is adjusted every three years. For the most recent figure, see Your Retirement Account in Bankruptcy.) 11 U.S.C. § 522(b)(3)(C)(n). Education IRA’s are protected up to $6,225. 11 U.S.C. §541(b)(5)(c).
A pension, profit sharing, stock bonus, or other qualified plan is fully protected with the exception of amounts contributed in the 120 days prior to filing. 600.5451(1)(l).

Wages

You can protect up to 60% of earned but unpaid wages for head of household and up to 40% for others. The head of household can keep at least $15 per week plus $2 per week for each dependent other than the spouse and $10 per week for others. 600.531.
Insurance Benefits

Insurance benefits are fully protected regardless of the amount. 500.2207. Benefits paid on behalf of an employer are fully protected. 500.2210. Benefits paid by any stock, mutual life, health, or casualty insurance are also fully protected. 600.5451(1)(i).

Public Benefits

The public benefits listed below are fully protected regardless of the amount received.

Crime victims’ compensation (18.362)
Unemployment compensation (421.30)
Korean War veterans’ benefits (35.977)
Vietnam War veterans’ benefits (35.1027)
Welfare benefits (400.63)
Worker’s compensation benefits (418.821)

Tools of Trade

Your interest in the tools, implements, materials, stock, and other items necessary to carry on your profession, trade, occupation, or business is protected up to $2,525. 600.5451(1)(i).
Researching Exemption Statutes

aaaaa

a1

6th Circuit Says Michigan Debtors Can Use Bankruptcy-Only Exemptions

On August 20, 2012, the United States Court of Appeals for the Sixth Circuit ruled that people filing for bankruptcy in Michigan may use Michigan’s set of bankruptcy-only exemptions. The decision (in In re Schafer, 2012 WL 3553294 (6th Cir. August 20, 2012)) is good news for those filing for bankruptcy in Michigan.

The issue first hit the courts in 2011, when the Sixth Circuit Bankruptcy Appellate Panel held that Michigan’s bankruptcy-specific exemptions (found in Mich. Comp. Laws §600.5451) were unconstitutional.

Here’s what this all means.

What Are Bankruptcy Exemptions?

In Chapter 7 bankruptcy, exemptions allow you to keep certain types of property, often up to certain amounts of equity. For example, if the law provides you with a motor vehicle exemption up to $5,000, it means you can protect up to $5,000 in equity in your car. If your car is worth $3,000, the bankruptcy trustee cannot take it since all of the equity is covered by an exemption. Exemptions play a role in Chapter 13 bankruptcy too.

Bankruptcy-Only Exemptions

Federal bankruptcy law provides a set of exemptions. Each state has a set of exemptions as well.  Usually, those exemptions can be used in bankruptcy and to protect property from judgment creditors. But some states, like Michigan, have a set of state exemptions that apply only in bankruptcy. They cannot be used to protect property from judgment creditors. These are referred to as bankruptcy-only exemptions.

The Constitutionality of Bankruptcy-Only Exemptions

The Bankruptcy Appellate Panel in the 6th Circuit (which covers Kentucky, Michigan, Ohio, and Tennessee) held that Michigan’s bankruptcy-only exemptions were unconstitutional.  But four days ago, the 6th Circuit Court of Appeal reversed that decision – ruling that bankruptcy-only exemptions are constitutional. This means that once again, bankruptcy filers in Michigan can choose from three sets of exemptions:  the federal exemptions, Michigan’s regular exemptions (those that also apply to judgment creditors), and Michigan’s bankruptcy-only exemptions.

What Does This Mean for Michigan Bankruptcy Filers?

For bankruptcy filers, this is good news. It’s always better to have more options, and for many filers, the bankruptcy-only exemptions will protect more property.  For example, the homestead exemption in Michigan’s bankruptcy-only exemptions is significantly higher than the homestead exemption in Michigan’s general exemption scheme. So for filers that have a home, the bankruptcy-only exemptions may help those filers keep their home.

a1

help

Michigan Bankruptcy Chaper 7 & 13 facts and requirements.

Michigan residents who find themselves overwhelmed with debt can seek relief under the federal bankruptcy laws. There are two common forms of bankruptcy for individuals: Under Chapter 7, the courts sell off all non-exempt assets to pay off as much of your debt as possible and under Chapter 13, you keep all or most of your assets but must create a court-approved plan to pay off your debts over time. Although bankruptcy is handled in the federal courts, some of the details vary based on your being a Michigan resident.

District Bankruptcy Courts in Michigan

Michigan’s bankruptcy court is divided into the Eastern District, with the main court in Detroit, and the Western District, with the main court in Grand Rapids. Each district also has divisional offices where you may file so long as you file in the district where you live.

Can I File Chapter 7 Bankruptcy?

You may file Chapter 7 bankruptcy if your average monthly income for the six months before you file is less than Michigan’s median income for a family of your size. For example, if you are married with two children, you must earn less than Michigan’s median income for a family of four, which is $6,037 monthly for 2012. If you make more than this, you must pass a stringent means test to qualify for Chapter 7.

How Long Is a Chapter 13 Repayment Plan?

The amount of time you must spend paying your creditors also depends on your income as compared to Michigan’s median income. For example, if you make less than the median income, your repayment plan will usually be up to three years. If your income matches or exceeds the state median, your plan will be five years, unless you’re able to pay off all unsecured debt in less time.

Can I Keep My House and Car?

Both federal and state laws allow you to exclude certain personal property from your bankruptcy case. Michigan lets you choose whether to use the state or the federal exemptions, but you must pick one or the other, you cannot mix and match from both lists.

The federal and state lists include similar exemptions, although specific items and values vary. Some of these exemptions include:

  • Personal items such as family pictures, clothing, jewelry, and household goods
  • Public benefits
  • Retirement accounts
  • Tools of your trade

Exemption values for your home and car also differ. Michigan adjusts the dollar value of exemptions every three years. As of 2011, the state allows a homestead exemption up to $35,300 of equity or $52,925 for people aged 65 or older or disabled. The federal exemption is $21,625 or $43,250 for married couples filing jointly. The state allows you to keep up to $3,250 of equity in one vehicle, while the federal vehicle exemption is $3,450.

If you have moved to Michigan within two years prior to filing for bankruptcy, you must use the exemptions from your previous home state.

Information Is Not Advice

This article provides a general overview of bankruptcy in Michigan, but it is not legal advice. You should contact a Firebaugh and Andrews bankruptcy attorney for specific information related to your unique situation for a free consultation 734-722-2999

all

Michigan Bankruptcy Exemptions

When you file for bankruptcy you are permitted to use Michigan state laws known as exemptions to protect your personal property. In a Chapter 7 bankruptcy the trustee may sell your property if it is worth more than what the exemption amount is. In a Chapter 13 bankruptcy you are permitted to keep your personal property if it is worth more than the exemption amount but you will have to pay back your creditors the portion that is not exempt.

Read on to learn what property is exempt in Michigan.

What Are Bankruptcy Exemptions?

Bankruptcy exemptions determine what type of property you can keep when filing for bankruptcy. Every state has its own bankruptcy exemption laws that specify the types and amounts of property that you can keep. Items like your house, car, and household goods are generally protected and can’t be sold in order to pay off your debts. If an item is not protected or is worth more than what the state exemption will allow you may be forced to sell the item to pay off your debts.

In a Chapter 13 bankruptcy you are permitted to keep property that is worth more than what the state exemptions allow provided that you pay back your creditors the portion that is not exempt.

Choosing Between State and Federal Exemptions

Not only does every state have its own bankruptcy exemption laws, there are federal exemption laws as well. Michigan residents are permitted to use either state or federal exemptions.

Important note: In 2011 the Sixth Circuit Bankruptcy Appellate Panel found that Michigan’s bankruptcy-only exemptions (these are exemptions that apply only in bankruptcy, and not to other situations where a creditor is trying to collect a debt) were unconstitutional. Luckily, in August of 2012, the Sixth Circuit Court of Appeal reversed that decision, holding that Michigan’s bankruptcy-only exemptions are constitutional. As of now, Michigan bankruptcy filers can choose to use the bankruptcy-only exemptions.

az

(To learn more, see the blog post titled 6th Circuit Says Michigan Filers Can Use Bankruptcy-Only Exemptions.)

Michigan Exemptions and Married Debtors

Married debtors filing jointly are permitted to double the listed exemptions amounts. The exception to the rule is the homestead exemption. Only one debtor may exempt the equity in a home, not both.

Common Michigan Exemptions

Some of the more commonly used Michigan exemptions are listed below. All law references are to the Michigan Compiled Laws unless otherwise indicated.

Note: The dollar amounts for many of the below exemptions will change on April 1, 2014. It may take several days to update this article. To get up-to-date dollar figures that will apply if you file your bankruptcy case on or after April 1, 2014, see Michigan Bankruptcy Exemption Amounts to Increase on April 1, 2014.)

Homestead Exemption

The homestead exemption protects the equity that you have in your residence up to $37,775 (if you are over 65 or disabled the limit is $56,650). 600.5451(1)(n). For more information see the Michigan Homestead Exemption in Bankruptcy.

Motor Vehicle Exemption

The motor vehicle exemption protects equity that you have in your vehicle up to $3,475. This exemption can only be applied to one vehicle. 600.5451(1)(g). For more information, see the Michigan Motor Vehicle Exemption in Bankruptcy.

Household Goods and Personal Property

This exemption protects your household goods such as furniture, utensils, books, appliances, and jewelry valued up to $600 per item and $3,775 total. 600.5451(1)(c). In addition:

  • There is no limit as to the amount of clothing that you can keep. 600.5451(1)(a)(iii).
  • Computer accessories are protected up to $650. 600.5451(1)(n).
  • There is no limit to the amount of family pictures that you can keep. 600.5451(1)(a)(i).

Pension and Retirement Accounts

Most pension and retirement accounts are completely protected with a few exceptions.

  • Individual Retirement Accounts and Annuities are fully protected with the exception of amounts that are contributed within the 120 days prior to filing for bankruptcy. 600.5451(1)(l).
  • Traditional, Simple, or Roth IRA’s are protected up to $1,245,475. (This amount is adjusted every three years. For the most recent figure, see Your Retirement Account in Bankruptcy.) 11 U.S.C. § 522(b)(3)(C)(n).
  • Education IRA’s are protected up to $6,225. 11 U.S.C. §541(b)(5)(c).
  • A pension, profit sharing, stock bonus, or other qualified plan is fully protected with the exception of amounts contributed in the 120 days prior to filing. 600.5451(1)(l).

Wages

You can protect up to 60% of earned but unpaid wages for head of household and up to 40% for others. The head of household can keep at least $15 per week plus $2 per week for each dependent other than the spouse and $10 per week for others. 600.531.

Insurance Benefits

Insurance benefits are fully protected regardless of the amount. 500.2207. Benefits paid on behalf of an employer are fully protected. 500.2210. Benefits paid by any stock, mutual life, health, or casualty insurance are also fully protected. 600.5451(1)(i).

Public Benefits

The public benefits listed below are fully protected regardless of the amount received.

  • Crime victims’ compensation (18.362)
  • Unemployment compensation (421.30)
  • Korean War veterans’ benefits (35.977)
  • Vietnam War veterans’ benefits (35.1027)
  • Welfare benefits (400.63)
  • Worker’s compensation benefits (418.821)

Tools of Trade

Your interest in the tools, implements, materials, stock, and other items necessary to carry on your profession, trade, occupation, or business is protected up to $2,525. 600.5451(1)(i).

Researching Exemption Statutes

This article only mentions the most commonly used Michigan exemptions. It does not mention all exemptions that are available to you. Keep in mind that state exemptions change periodically so you should always check the exemption statutes themselves before filing for bankruptcy.