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About Bankruptcy Exemptions

Michigan State & Federal Bankruptcy Exemptions

The term "asset protection" is commonly used in bankruptcy cases to refer to laws that allow you to keep certain property even when you owe money to others. Each state designates which types of property debtors can keep so they can continue living a normal life. If everything was stripped away from a debtor through the bankruptcy process, it would actually inhibit people from filing in the first place. The purpose of bankruptcy is to allow people to have debt relief so that they can climb out of the cycle of debt, not lose everything they own. The rules that designate which property is off-limits are called "property exemptions".

There are both state and federal bankruptcy exemptions. The exemptions that are set out by the national government, called federal exemptions, are found in the federal bankruptcy code. These are uniform across the United States. Each state also has its own unique set of bankruptcy exemptions that only apply to residents filing in that respective state. These are different from the federal government's rules.

While the majority of states require that debtors use the state exemptions, there are a handful of states which allow debtors to choose between using the state and the federal bankruptcy exemptions. Michigan is one of these states. While you do have a choice between the two systems, you must pick one. You are not permitted to mix and match the exemptions between state and federal. To find out which one would allow you to keep more of your property, speak to a Detroit bankruptcy attorney from the Cartwright Law Firm, PLLC We can assess your situation to see if the state or federal exemptions would be more beneficial for you to pursue.

Comparing Michigan Exemptions to Federal Exemptions

According to MCL §600.5451, a debtor may keep the following items:

  • family pictures
  • certain arms
  • clothing (excluding furs)
  • cemeteries
  • certain health aids
  • household goods
  • jewelry
  • tools of the trade
  • disability benefits
  • retirement accounts
  • child support

The federal government, on the other hand, allows debtors to retain motor vehicles, jewelry, health aids, tools of the trade, spousal support, child support, personal injury settlements, and the homestead among others. To account for inflation, the federal government makes adjustments to these exemptions every three years. These go into effect on April 1st. The most recent adjustment was on April 1st, 2013.

To ensure that you maximize the amount of property you can keep, speak to a member of our legal team. Our goal as your Detroit bankruptcy lawyer is provide the best possible legal counsel for every one of our clients. Fill out your free case evaluation today so we can get started!

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Cartwright Law Firm, PLLC - Detroit Bankruptcy Lawyer
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