Michigan Bankruptcy Exemptions

Michigan bankruptcy exemptions let you keep your home, car, retirement accounts, and other property you need for a fresh start. Michigan is one of only a handful of states that lets filers choose between state and federal bankruptcy exemptions, and picking the right list can protect thousands of dollars in home equity, vehicle value, and savings. This article explains how each list works, which one is likely better for you, and what happens to property you cannot protect.

Choosing an Exemption List in a Michigan Bankruptcy

Although you have two choices, the Michigan state exemptions or the federal bankruptcy exemptions, you can't mix and match and must pick one list. To help you compare, we've charted both exemption sets below. If you select Michigan's state exemptions, you can also use the federal nonbankruptcy exemptions.

Exemption Caution: The state exemption amounts below reflect the Michigan Department of Treasury's inflation adjustment effective April 1, 2026. The next scheduled adjustment is April 1, 2029. Some amounts could change sooner if pending legislation (HB 4901) is signed into law. Verify current amounts through research or by consulting a local bankruptcy lawyer.

Which Exemption List Is Better for You?

It depends on whether you own a home. Individual homeowners will likely be better protected by Michigan's state homestead exemption of $51,150, or $76,725 if you're 65 or older or disabled, which beats the federal individual homestead cap of $31,575. That said, married couples who coown property may come out ahead with the federal list, which allows doubling to $63,150.

Filers who don't own a home will likely do better with the federal list. The federal exemptions offer a higher motor vehicle exemption ($5,025 versus $4,725) and a wildcard exemption worth $1,675 plus up to $15,800 in unused homestead value. Michigan's state list has no wildcard. Michigan does edge out the federal list on tools of the trade ($3,400 versus $3,175), but that advantage alone rarely tips the scales for renters.

Other Michigan Bankruptcy Exemptions

Michigan law and federal law protect other property beyond the exemptions in the chart. Exemptions can change, so verify that they remain valid law, and read the statute for qualification requirements before relying on any exemptions.

Michigan Pension Exemptions

• 38.559(6); 38.1683 - Firefighters, police officers.
• 38.1057; 38.1683 - Legislators.
• 38.1346; 38.1683 - Public school employees.
• 38.1643; 38.1683 - State police.
• 38.1689 - State employees.
• 38.2308; 38.1683 - Judges and probate judges.

Michigan Public Benefit Exemptions

• 18.362 - Crime victims' compensation.
• 35.926 - Veterans' benefits for WWII veterans.
• 35.977 - Veterans' benefits for Korean War veterans.
• 35.1027 - Veterans' benefits for Vietnam veterans.
• 330.1158a - Family support subsidy.
• 400.63 - Social welfare benefits.
• 418.821 - Workers' compensation.
• 421.30 - Unemployment compensation.

Michigan Insurance Exemptions

• 500.2207 - Life insurance.
• 500.2210 - Employer-sponsored life insurance policy or trust fund.
• 500.4054 - Life, endowment, or annuity proceeds if the policy clause prohibits proceeds from being used to pay the beneficiary's creditors.
• 500.8181 - Fraternal benefit society benefits.
• 600.5451(1)(j) - Disability, mutual life, or health benefits.

Miscellaneous Michigan Exemptions

• 257.524 - State treasurer deposits.
• 449.25 - Property of a business partnership.
• 600.4031 - Milk and cream sales proceeds.
• 11 U.S.C. § 541(b)(5)-(6) - Up to $6,825 in an education IRA and up to $6,825 in pre-purchased tuition credits.

Important retirement benefit note. Federal law lets all filers keep retirement accounts in bankruptcy, regardless of which exemption list they choose. These accounts include 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and traditional and Roth IRAs to $1,711,975 per person. (11 U.S.C. §§ 522(b)(3)(C), (n); amounts valid for bankruptcy cases filed between April 1, 2025, and March 31, 2028.)

What Happens to Property You Can't Exempt in a Michigan Bankruptcy?

Non-exempt property is handled differently depending on which chapter you file. In Chapter 7 bankruptcy, the bankruptcy trustee assigned to your case will sell non-exempt property and distribute the proceeds to your creditors. In Chapter 13, you keep all your property, but you pay your creditors the value of any nonexempt property through your repayment plan.

Here's an example using a vehicle. Say you own a car worth $3,000 and your state's vehicle exemption is $5,000.

• Chapter 7 Bankruptcy. You keep the car because the exemption covers the full value. But if the car were worth $15,000, the trustee would sell it, pay you $5,000 for the exemption, and distribute the rest to your unsecured creditors.
• Chapter 13 Bankruptcy. You keep the car no matter what. But if it were worth $15,000, you'd have to pay creditors at least $10,000 (minus sales costs) through your plan.

Keep in mind these examples don't account for a vehicle loan. More on that below.

How Do You Protect a Financed Home or Car in a Michigan Bankruptcy?

Filing for bankruptcy doesn't let you walk away from a mortgage or car loan and keep the property. If you still owe money, you must pay as agreed. Why? When you bought the property, you gave the lender a lien on it, which is a secured debt that survives bankruptcy and lets the lender foreclose or repossess if you stop paying.

Protecting Financed Property in Chapter 7 Bankruptcy

Chapter 7 has no mechanism to catch up on missed payments over time. Your mortgage or car loan must be current when you file. Fall behind, and you'll lose the property. The lender will ask the court to allow foreclosure or repossession during the case or shortly after.

Protecting Financed Property in Chapter 13 Bankruptcy

Chapter 13 lets you keep financed property even if you're behind. You can pay the arrears through your three- to five-year plan while continuing to make regular monthly payments. Before the judge approves your plan, you'll need to show you can afford both.

Some filers can also reduce what they owe by cramming down an auto loan to the car's current value or stripping a junior mortgage or lien from a home. Learn more about catching up on arrearages in Chapter 13 and how mortgages work in bankruptcy.

Michigan Bankruptcy Exemption Timing Rules

You can't move to a state with better exemptions right before filing and expect them to apply. Federal law requires you to have lived in a state for at least two years before you can use its exemptions. (11 U.S.C. § 522(b)(3)(A).) If you haven't, you'll use the exemptions of the state where you lived the longest during the 180 days immediately before the two-year period before your filing date.

Here's a simple way to figure it out. Count back two and a half years from your planned filing date. Then ask yourself where you lived the longest during the first six months of that period. That's the state whose exemptions you use.

Example. Suppose you planned to file on January 1, 2022. Your two-and-a-half-year window would start July 1, 2019. You'd use the exemptions of whichever state you lived in the most from July 1, 2019, through December 31, 2019. You wouldn't have to file there, just use that state's exemption list.

Special Homestead Exemption Rules

The homestead exemption protects your equity in your primary residence only, not rental property or a vacation home. What exactly it covers depends on Michigan's statute, including the dollar amount of equity protected, any acreage limits, whether it applies to a manufactured home, and whether you need to file anything with the county clerk. Read the statute carefully to confirm what qualifies in your situation.

How to Verify Available Exemptions in Michigan

Exemption amounts change, and the figures listed here may not reflect the most current law. Before filing, confirm current amounts through the Michigan Compiled Laws or by talking to a local bankruptcy attorney. A lawyer will also help you pick the exemption list that works best for your situation, a choice that can be worth thousands.

Next Steps

Choosing the right exemption list is one of the most important decisions you'll make in a Michigan bankruptcy. If you'd like more information:

• Learn what you should know about filing for bankruptcy.
• See if you qualify to erase debt in a Chapter 7 case.
• Find out how Chapter 13 solves more problems than Chapter 7.
• Learn about timing your bankruptcy filing and when it makes sense to delay.