Bankruptcy Exemption Requirements

By Tom Streissguth

If your debts are out of control and you have little hope of catching up on the bills, you have the option to file for bankruptcy protection. The federal bankruptcy code allows you to file under Chapter 7 or Chapter 13 of the code. In a Chapter 7 bankruptcy filing, a court-appointed trustee seizes your non-exempt property to repay your debts. In a Chapter 13 filing, the trustee sets a repayment schedule, and you are allowed to keep your property. Exemptions are an important consideration in both forms of bankruptcy.


Bankruptcy law allows you to keep certain property that you need to survive, support yourself and get back on your financial feet. Specific property is exempt from seizure, no matter how much you owe or how little money you have. This includes basic shelter, a home, transportation, a car and personal goods, such as furniture, tools of your trade, and a limited amount of cash and investments.

Federal and State Schedules

Although federal bankruptcy law sets out exemptions, the states enforce their own bankruptcy laws. In some states, residents may choose from the federal or state schedule of exemptions. These include Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Texas, Vermont, Washington and Wisconsin. In all other states, you must use the state schedule.

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Claim of Exemptions

When you file for bankruptcy, you must submit Schedule C, which is your claim of all exempt property, to the court. You give a description of the property, the amount of the allowed exemption, and the current value of the property. By "value," the law means current resale value, not the original price. Either the trustee or any creditor may file an objection to any of your claimed exemptions; the objection must be filed within 30 days of the meeting of trustees, or within 30 days of any amendments made to Schedule C. If there is no objection within the legal time frame, you may keep the property.

Exempt Property

Federal exemptions include any equity in your primary residence or homestead, up to $21,625; this amount is doubled for a married couple. This means that if the house is foreclosed and sold in bankruptcy, you are allowed to retain $21,625 of the equity you have in the property. Similarly, you may exempt $3,450 of equity in a car; $11,525 in household goods, clothing, appliances, furnishings and books; and $1,450 in jewelry. Retirement accounts such as IRAs are exempt up to $1,171,650; Social Security benefits, alimony, child support, veteran's benefits and unemployment compensation are wholly exempt. A wild card exemption also allows you to protect up to $1,150 in any asset, including cash or property.


Property that you are unable to exempt by a claim on Schedule C is subject to seizure by the trustee in a Chapter 7 bankruptcy. You can keep property that is non-exempt by arranging a payment for that property to the trustee, or by signing a reaffirmation agreement with the lender if the property was bought with a loan. In Chapter 13, the trustee draws up a repayment scheduling by calculating the sum total of your non-exempt assets and your income; a percentage of this amount goes toward your debts. Secured debts, which are debts that are guaranteed by property, are paid in full, while unsecured debts are settled for a portion of the outstanding liability.

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Bankruptcy & Exemptions in Michigan


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