Category Archives: Michigan Bankruptcy Exemptions

Can I keep my jewelry if I file for bankruptcy in Michigan?

You can use Michigan bankruptcy exemptions to keep jewelry, watches, and wedding rings, up to a certain dollar amount.

Whether you can keep jewelry, watches, and wedding rings in Michigan depends on what type of bankruptcy you file (Chapter 7 or Chapter 13), whether you use the Michigan or federal bankruptcy exemptions, how much the jewelry is worth, and whether you need to protect other assets as well.

Keeping Jewelry in Chapter 13 Bankruptcy in Michigan

In Chapter 13 bankruptcy, often called a reorganization bankruptcy, you enter into a repayment plan for three to five years. Your creditors get paid through the plan – some in full and some in part. Although a Chapter 13 plan requires a long commitment, the advantage is that you get to keep your property, including jewelry.

If you have very expensive jewelry however, that will probably affect how much you will be required to repay unsecured creditors.

Keeping Jewelry in Chapter 7 Bankruptcy in Michigan

Chapter 7 bankruptcy works differently. In Chapter 7, you must give up certain items of property. The bankruptcy trustee sells this property and uses the proceeds to repay (at least in part) your unsecured creditors.

Michigan Bankruptcy Exemptions

Not all of your property is up for grabs, however. Michigan (and all of the other states) has enacted laws that protect certain types of property. These laws are called exemptions. Some property is exempt no matter what the value, and other property is exempt only up to a dollar amount. The idea behind exemptions is that someone filing for bankruptcy should not be stripped of basic things needed for living – like shelter, clothing, furniture, a car, and the like. (Learn more about how bankruptcy exemptions work.)

In Michigan, you can choose to use either the Michigan bankruptcy exemptions or another set of exemptions called the federal bankruptcy exemptions (17 other states and the District of Columbia also allow you to use the federal exemptions). Whichever set you choose, you must stick with it — you cannot mix and match from each set. For this reason, it’s important to review all of the exemptions in each system. You wouldn’t want to pick one system in order to keep jewelry, only to lose your house. (Review the Michigan bankruptcy exemptions and the federal bankruptcy exemptions.)

Keeping Jewelry, Watches, and Wedding Rings Under the Federal Bankruptcy Exemptions

There are several provisions of the federal bankruptcy exemption system that you can use to keep your jewelry. If you are married and filing a joint bankruptcy, you can double these amounts.

  • Jewelry exemption. You can keep up to $1,550 of your jewelry.
  • Wildcard exemption. You can keep up to $1,225 of any type of property, including your jewelry. If you don’t want to use the wildcard to protect other property, you can put the full $1,225 towards your jewelry.
  • Unused homestead exemption.  If you don’t use the homestead exemption, or only use part of it, you can use up to $11,500 of the remaining amount for anything you want, including your jewelry. The federal homestead exemption is $22,975.

Keeping Jewelry, Watches, and Wedding Rings Under the Michigan Bankruptcy Exemptions

In Michigan, you can keep jewelry using the below exemptions. If you are married and filing a joint bankruptcy, you can double these amounts.

  • Jewelry exemption. Michigan allows you to keep up to $600 per item of the following: appliances, books, furniture, household goods, and jewelry. The only caveat is that the combined total of these items cannot exceed $3,775. This means that if you want to keep an antique sofa worth $3,700, you’ll only have $75 left for jewelry.
  • Wearing apparel. Michigan allows you to exempt wearing apparel. A few courts across the country have included watches in the definition of wearing apparel. If you want to use this exemption to protect a watch, check with a local bankruptcy attorney to see what your local court might do.

How to Value Jewelry in Bankruptcy

The value of your jewelry for exemption purposes is the amount you would have to pay on the date you file for bankruptcy to replace each item with a used item of similar age and in similar condition. There are various methods of determining the replacement value, but for expensive jewelry you will almost always need an appraisal. (Learn more about how to value personal property in bankruptcy.)

Other Ways to Keep Jewelry in Michigan Bankruptcy

If you want to keep nonexempt items of jewelry, the trustee may accept other items of exempt property in exchange for the jewelry. The trustee would then sell these items instead of your jewelry to repay your creditors.

Similarly, if you have some cash, you may be able to reimburse the bankruptcy trustee for the value of the jewelry you want to keep. Again, the trustee would use this money (instead of selling the jewelry) to repay unsecured creditors.

Firebaugh & Andrews can help call them today to set up a free consultation 734-722-2999

 

What Are The Michigan Bankruptcy Exemptions?

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.

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.

Homestead Exemption

The homestead exemption protects the equity that you have in your residence up to $37,775

Motor Vehicle Exemption

The motor vehicle exemption protects equity that you have in your vehicle up to $3,475.

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.
  • 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 call Firebaugh & Andrews for your free consultation today 734-722-2999

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

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

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.abb

State of Michigan Bankruptcy Exemptions

600.5451 Bankruptcy; exemptions from property of estate; exception; exempt property sold, damaged, destroyed, or acquired for public use; amounts adjusted by state treasurer; definitions.

Sec. 5451.

(1) A debtor in bankruptcy under the bankruptcy code, 11 USC 101 to 1532, may exempt from property of the estate property that is exempt under federal law or, under 11 USC 522(b)(2), the following property:

(a) All of the following:

(i) Family pictures.

(ii) Arms and accoutrements required by law to be kept by a person.

(iii) Wearing apparel, excluding furs.

(iv) Cemeteries, tombs, and rights of burial in use as repositories for the dead of the debtor’s family or kept for burial of the debtor.

(v) Professionally prescribed health aids.

(b) Provisions and fuel for comfortable subsistence of each householder and his or her family for 6 months.

(c) The interest, not to exceed a value of $450.00 in each item and an aggregate value of $3,000.00, in household goods, furniture, utensils, books, appliances, and jewelry.

(d) The interest, not to exceed $500.00 in value, in a seat, pew, or slip occupied by the debtor or the debtor’s family in a house or place of public worship.

(e) The interest, not to exceed $2,000.00 in value, in crops, farm animals, and feed for the farm animals.

(f) The interest, not to exceed $500.00 in value, in household pets.

(g) The interest, not to exceed $2,775.00 in value, in 1 motor vehicle.

(h) The interest, not to exceed $500.00 in value, in 1 computer and its accessories.

(i) The interest, not to exceed $2,000.00 in value, in the tools, implements, materials, stock, apparatus, or other things to enable a person to carry on the profession, trade, occupation, or business in which the person is principally engaged.

(j) Money or other benefits paid, provided, allowed to be paid or provided, or allowed, by a stock or mutual life, health, or casualty insurance company because of the disability due to injury or sickness of an insured person, whether the debt or liability of the insured person or beneficiary was incurred before or after the accrual of benefits under the insurance policy or contract, except that this exemption does not apply to actions to recover for necessities contracted for after the accrual of the benefits.

(k) All individual retirement accounts, including Roth IRAs, or individual retirement annuities as defined in section 408 or 408a of the internal revenue code, 26 USC 408 and 408a, and the payments or distributions from those accounts or annuities. This exemption applies to the operation of the federal bankruptcy code as permitted by section 522(b)(2) of the bankruptcy code, 11 USC 522. This exemption does not apply to the amount contributed to an individual retirement account or individual retirement annuity within 120 days before the debtor files for bankruptcy. This exemption does not apply to any of the following:

(i) The portion of an individual retirement account or individual retirement annuity that is subject to an order of a court pursuant to a judgment of divorce or separate maintenance.

(ii) The portion of an individual retirement account or individual retirement annuity that is subject to an order of a court concerning child support.

(iii) The portion of an individual retirement account or individual retirement annuity that is attributable to contributions to the individual retirement account or premiums on the individual retirement annuity, including the earnings or benefits from those contributions or premiums, that, in the tax year made or paid, exceeded the deductible amount allowed under section 408 of the internal revenue code, 26 USC 408. This limitation on contributions does not apply to a rollover of a pension, profit-sharing, stock bonus plan, or other plan that is qualified under section 401 of the internal revenue code, 26 USC 401, or an annuity contract under section 403(b) of the internal revenue code, 26 USC 403.

(l) The right or interest of a person in a pension, profit-sharing, stock bonus, or other plan that is qualified under section 401 of the internal revenue code, 26 USC 401, or an annuity contract under section 403(b) of the internal revenue code, 26 USC 403, if the plan or annuity is subject to the employee retirement income security act of 1974, Public Law 93-406, 88 Stat. 829. This exemption does not apply to any amount contributed to a pension, profit-sharing, stock bonus, or other qualified plan or a 403(b) annuity if the contribution occurs within 120 days before the debtor files for bankruptcy. This exemption does not apply to the right or interest of a person in a pension, profit-sharing, stock bonus, or other qualified plan or a 403(b) annuity to the extent that the right or interest is subject to either of the following:

(i) An order of a court pursuant to a judgment of divorce or separate maintenance.

(ii) An order of a court concerning child support.

(m) The interest of the debtor, the codebtor, if any, and the debtor’s dependents, not to exceed $30,000.00 in value or, if the debtor or a dependent of the debtor at the time of the filing of the bankruptcy petition is 65 years of age or older or disabled, not to exceed $45,000.00 in value, in a homestead.

(n) Property described in section 1 of 1927 PA 212, MCL 557.151, or real property, held jointly by a husband and wife as a tenancy by the entirety, except that this exemption does not apply with regard to a claim based on a joint debt of the husband and wife.

(o) If the owner of a homestead dies, leaving a surviving spouse but no children, the surviving spouse before his or her remarriage, unless the surviving spouse is the owner of a homestead in his or her own right, may exempt the homestead and the rents and profits of the homestead.

(2) An exemption under this section does not apply to a mortgage, lien, or security interest in the exempt property that is consensually given or lawfully obtained unless the lien is obtained by judgment, attachment, levy, or similar legal process in connection with a court action or proceeding against the debtor.

(3) If property that is exempt under this section is sold, damaged, destroyed, or acquired for public use, the right to receive proceeds or, if the owner receives proceeds and holds them in a manner that makes them identifiable as proceeds, the proceeds received are exempt from the property of a federal bankruptcy estate in the same manner and amount as the exempt property. An exemption under this subsection may be claimed up to 1 year after the receipt of the proceeds by the owner.

(4) On March 1, 2005 and at the end of each 3-year period after 2005, the state treasurer shall adjust each dollar amount in this section or, for each adjustment after March 1, 2005, each adjusted amount, by an amount determined by the state treasurer to reflect the cumulative change in the consumer price index for the 3-year period ending on the December 31 preceding the adjustment date and rounded to the nearest $25.00. The state treasurer shall publish the adjusted amounts. The adjusted amounts apply to cases filed on or after April 1 following the adjustment date.

(5) As used in this section:

(a) “Consumer price index” means the consumer price index for all urban consumers in the area of Detroit-Ann Arbor-Flint, Michigan, published by the United States department of labor or, if the United States department of labor ceases publishing that index, the most similar index available.

(b) “Disabled” means unable to engage in substantial gainful activity, as defined by 42 USC 1382c(a)(3)(E), as a result of a physical or mental impairment and receiving supplemental security income under 42 USC 1382c(a)(3)(A) and (C).

(c) “Proceeds” means money payable or paid as a result of 1 or more of the following:

(i) Sale of the property.

(ii) Insurance or other indemnification for damage or destruction of the property.

(iii) Compensation for the acquisition for public use of the property.

(d) “Homestead” means 1 of the following owned or being purchased under an executory contract by the debtor that the debtor or a dependent of the debtor occupies as his or her principal residence:

(i) If the land is located outside of a recorded plat, city, or village, a residential dwelling and appurtenances and the land on which they are situated, not exceeding 40 acres.

(ii) If the land is located within a recorded plat, city, or village, a residential dwelling and appurtenances and the land on which they are situated, not exceeding 1 lot or parcel.

(iii) A residential dwelling situated on land not owned by the debtor.

(iv) A condominium unit.

(v) A unit in a cooperative.

(vi) A motor home.

(vii) A boat or other watercraft.

(e) “Residential dwelling” includes, but is not limited to, a house or a manufactured or mobile home.