No, filing for bankruptcy in Michigan does not necessarily mean losing your house. Michigan’s bankruptcy laws include a homestead exemption, which protects the equity in your primary residence during bankruptcy and can help you keep your home. Under Michigan law, you can exempt up to $46,125 in home equity. If you are disabled or 65 or older, the exemption increases to $69,200. This exemption applies to various types of residences, such as houses, condos, mobile homes, and even boats used as primary residences.
State vs. Federal Exemptions
Michigan residents can choose between state and federal exemption systems when filing for bankruptcy. Each system offers different benefits: the federal homestead exemption, for example, caps at $27,900, while Michigan’s state exemption is significantly higher. However, the federal system offers additional flexibility, such as a wildcard exemption for covering other assets. Michigan’s exemption is generally more beneficial for homeowners with significant equity, but the federal system might suit those with more diverse assets to protect.
Chapter 7 vs. Chapter 13 Bankruptcy: How Different Chapters Can Impact Your Home
The type of bankruptcy you file—Chapter 7 or Chapter 13— can greatly influence whether you can keep your home. In Chapter 7, the bankruptcy trustee can sell your non-exempt assets, which could include your home if it has too much equity. In Chapter 13, however, you can retain your home by reorganizing your debt and making payments over three to five years. This chapter can benefit those with equity exceeding Michigan’s exemption limits, as it provides more flexibility in protecting your property.
Joint Bankruptcy Filing and Homestead Exemption Limits for Spouses
Married couples filing jointly cannot double the Michigan homestead exemption, meaning they must share either the $46,125 or $69,200 limit. However, Michigan offers protections for properties held as tenancy by the entirety (TBE), which is common among married couples. In a TBE arrangement, married spouses own a property jointly as a single legal entity. This form of ownership can shield the home from creditors if only one spouse files for bankruptcy.
How a Michigan Bankruptcy Attorney Can Help You Protect Your Home
With so many rules, exemptions, and procedures in bankruptcy, it’s easy to miss opportunities or make mistakes that could put your home at risk. A knowledgeable bankruptcy lawyer can identify and explain the bankruptcy laws that apply to your situation and help you protect your home by:
- Assessing your home equity to determine whether it falls within the exemption limits
- Helping you decide whether to use Michigan exemptions or federal homestead exemptions
- Filing the required paperwork accurately so you can claim the homestead exemption
- Assisting you in setting up a Chapter 13 repayment plan to keep your home
- Negotiating with creditors to prevent them from seizing your home in Chapter 7 bankruptcy
- Analyzing your ownership status to determine if tenancy by the entirety offers extra protection
- Exploring the possibility of using a wildcard exemption to cover additional home equity
- Defending you if a trustee challenges your homestead exemption in bankruptcy court
Contact a Bankruptcy Lawyer in Michigan Now
If you’re thinking about filing for bankruptcy and want to protect your home, the Michigan bankruptcy attorneys at Marrs & Terry, PLLC, can help. Our team will answer your questions, explain your options, and work with you to find the ideal path forward. Take the first step toward financial peace by calling us at 734-663-0555 or contacting us online to arrange your initial consultation.