Michigan Bankruptcy Exemptions and Law

Considering filing for bankruptcy can feel overwhelming, but it’s often the first real step toward getting your life back on track. For many Michiganders, bankruptcy can stop wage garnishment, prevent repossession, and give you room to breathe when bills keep piling up. Before you decide if it’s right for you, it’s important to understand how Michigan’s bankruptcy rules work.

This guide covers key information you’ll want to know about filing for bankruptcy in Michigan. We address how state and federal laws work together to shape your property rights and your options. We’ll also cover important details like Michigan’s exemptions, income limits, and protections for your assets and financial future.

If you’re facing mounting debt and wondering whether bankruptcy makes sense for you, touch base with a lawyer. A solid Michigan bankruptcy attorney can help you understand the related pros and cons, along with debt relief alternatives. Most offer initial consultations free of charge.

In the interim, let’s start with some basic background information.

Legal Framework

The U.S. Bankruptcy Code, which is a federal law, governs bankruptcy. States often establish their own bankruptcy rules about which property is exempt from bankruptcy. Michigan has its own exemption rules, but you also have the option to use the federal exemption system instead. You’ll have to choose one or the other for all of your exemptions.

In general, exempt property is protected from creditors, and you won’t lose it during bankruptcy. To understand the exemption process in Michigan, let’s examine the two most common types of consumer bankruptcy.

Chapter 7 Bankruptcy

This is sometimes known as liquidation bankruptcy. To qualify for Chapter 7, your income must fall below the state’s median or pass a means test.

In a Chapter 7 case, you’ll turn over your non-exempt property to a bankruptcy trustee. The trustee will sell these assets to repay your creditors. You can typically use your state exemptions in a Chapter 7 bankruptcy to protect certain assets. Successful completion of a Chapter 7 bankruptcy usually takes about three to four months. While your debts may be discharged under Chapter 7, it will have a negative effect on your credit rating that can last for years.

Chapter 13 Bankruptcy

Also known as reorganization, Chapter 13 allows you to restructure your debts if you need additional time to pay them off. In most cases, you’ll make one monthly payment according to a court-approved repayment plan that helps you get rid of some or all of your debt.

Chapter 13 is popular with homeowners because it usually allows them to keep their homes. It also helps you to pay certain debts that can’t be wiped out in Chapter 7, like tax debts and most student loans. These bankruptcies typically take three to five years to complete and carry less of a ding to your credit than Chapter 7.

The Automatic Stay

One key benefit of either type of bankruptcy is the automatic stay. The court issues this order when you file your bankruptcy petition. It stops most collection actions, including court proceedings and foreclosures, while you work things out with your creditors through the bankruptcy process.

Secured vs. Unsecured Debt

If you’re thinking of filing for bankruptcy, knowing the difference between secured and unsecured debt is important. Let’s take a closer look at both.

Unsecured Debt

When you have unsecured debt, a creditor has no right to seize any of your property for nonpayment. This is the debt that is most likely to be eliminated in bankruptcy.

The most common type of unsecured debt is credit card debt, but medical bills and court judgments also qualify. Some unsecured debt, like child support obligations, must be repaid in full and cannot be discharged in Chapter 7.

Secured Debt

Your debt to a creditor is secured when they have the right to repossess your property if you don’t pay. Home mortgages, car loans, and property liens are the most common types of secured debt.

Debt in Chapter 7

When you choose to file Chapter 7 bankruptcy, much of your unsecured debt will be eliminated. Creditors who hold secured debt have the option of seizing your property for failure to pay.

If you are filing Chapter 7 bankruptcy and want to keep property used to secure a debt, you’ll often have three options:

• Return the property to your lender or creditor: You’ll lose the property, but won’t be required to pay for it
• Keep the property while continuing to make payments: If the Michigan exemption is enough to cover your equity and you are current on payments, you can usually keep the property so long as you continue making payments
• Purchase the property outright: This is rare, as Chapter 7 bankruptcy filers are unlikely to have the necessary funds, but not unheard of

Understanding these implications can help you decide how to proceed.

Debt in Chapter 13

If you file for Chapter 13 bankruptcy, any non-mortgage secured debt is reworked to allow payments under your court-approved repayment plan over three to five years. Any unsecured debts are paid with whatever is left over after the secured creditors are paid.

Past-due mortgage payments are usually included in your Chapter 13 plan. Some courts also let you make your regular monthly mortgage payments through the plan. Once you complete your process, any unpaid unsecured debt is eliminated.

Am I Eligible for Bankruptcy in Michigan?

Federal law sets two means tests for determining Chapter 7 eligibility. Under the first test, if your income is less than the median for households of equal size in Michigan, you immediately qualify. The U.S. Department of Justice collects data on median household incomes for use in bankruptcy cases. As of 2026, the median income for a three-person Michigan household is $103,449.

The second means test is more thorough and uses your financial data from the previous six months to calculate your disposable income. If you’re found to have little to no disposable income, you’re eligible to file under Chapter 7.

Those who don’t qualify for Chapter 7 can opt for Chapter 13 instead. Under Chapter 13, you can’t exceed $526,700 in unsecured debt and $1,580,125 in secured debt. These federal figures adjust every three years to keep up with inflation.

Michigan Bankruptcy Exemptions

Personal bankruptcy offers people with more debt than they can repay a way to eliminate much of it. To help you start over after Chapter 7 bankruptcy, Michigan state law allows you to exempt some property from the bankruptcy process if it’s not being used as collateral. This exempt property is what you get to keep. The Michigan Department of Treasury adjusts state exemption values every three years.

Homestead Exemption

Each Michigan homeowner can exempt up to $51,150 of their equity in real property under the homestead exemption. That amount increases to $76,725 if you are aged 65 or older or are disabled. The Michigan exemption applies to any house, condo, mobile home, motor home, co-op unit, or boat that is the primary permanent residence you hold title to.

Michigan’s homestead exemption is per person, so married couples who file together can usually double the amount if both spouses own the home. This gives joint filers more protection for their equity.

Motor Vehicle Exemption

As of 2026, Michigan protects up to $4,725 of equity in one motor vehicle. This amount is adjusted as needed every three years to reflect changes in the cost of living.

Wage Exemption

Michigan doesn’t use fixed dollar amounts. Instead, the law protects a percentage of your take‑home pay. Coverage includes:

• 60% for the head of household
• 40% for other workers

There is also a minimum amount tied to the federal minimum wage to make sure you keep enough to live on.

Personal Property Exemption

Michigan provides a bankruptcy exemption for each of the following, regardless of value:

• Clothing
• Family pictures
• Burial plots
• Food and fuel to last six months
• Professionally prescribed health aids

You may claim per-item exemption amounts of up to $775 on each of the following, up to $5,125 in total value:

• Appliances
• Household goods
• Furniture
• Clothing (non-essential/higher value clothing like furs)
• Jewelry
• Utensils
• Books

The following types of personal property are exempt up to $875:

• Computers
• Household pets

Finally, up to $3,400 in farm animals, feed, and crops are exempt.

Retirement and Pension Benefits Exemption

Under Michigan’s exemption system, most IRAs are fully protected, no matter the balance. The only exceptions are contributions made within 120 days of filing or money added for fraudulent reasons.

Tools of the Trade Exemption

Any tools, materials, implements, or other equipment requirements for your job are exempt up to a total of $3,400. In addition, arms that you’re required by law to keep are exempt.

Insurance Exemptions and Wildcards

The following types of insurance and insurance benefits are exempt from bankruptcy in Michigan:

• Life insurance
• Employer-sponsored life insurance policies or trust funds
• Disability, mutual life, or health benefits
• Insurance proceeds held by an insurer

Unlike many states, Michigan doesn’t offer a wild card exemption. A wild card exemption is an amount that may be applied to any property, no matter how it is classified.

How Do I Start Bankruptcy in Michigan?

In Michigan, you must complete a credit counseling course from an approved provider within 180 days of filing for bankruptcy. You may request a 30-day waiver if you were unable to complete the course for legitimate reasons. After your case is filed, you must also complete a debtor education course before you can receive a discharge.

If you are not using an attorney, you’ll begin the bankruptcy process by downloading the correct form for your bankruptcy court district. The same form is used for both Chapter 7 and Chapter 13 bankruptcies.

After you file, you will attend a short hearing called the meeting of creditors (also known as the 341 meeting). This is where the bankruptcy trustee asks you questions about your paperwork. Creditors may attend, but most don’t.

Where Do I File for Bankruptcy in Michigan?

Bankruptcy courts are federal courts. There are two federal districts for the state of Michigan. The Eastern District of Michigan is headquartered in Detroit, while the Western District of Michigan is headquartered in Grand Rapids.

The Eastern District has bankruptcy courts in:

• Bay City
• Detroit
• Flint

The Western District has bankruptcy courts in:

• Grand Rapids
• Kalamazoo
• Lansing
• Marquette

If you don’t know where the nearest court is located, use the U.S. Court Locator.

How Much Does Bankruptcy Cost in Michigan?

It costs $338 to file for Chapter 7 bankruptcy and $313 to file under Chapter 13. The filing fees are the same if you’re using a lawyer or filing for yourself (“pro se”). If you can’t afford the fee, ask to pay in installments over 120 days. You can seek a fee waiver if your household income is less than 150% of the poverty line.

Everyone’s bankruptcy case is different, making it difficult to put an average price on the cost of a Michigan bankruptcy lawyer. Some attorneys will offer to file very simple Chapter 7 cases for as little as $500, but that’s usually for individuals with few assets. Most Michigan attorneys charge between $1,000 and $3,500 for a Chapter 7 bankruptcy, depending on your case’s complexity. Since Chapter 13 cases are usually more complex, an attorney tends to run between $2,500 and $6,000.

Legal Advice

It’s tempting to represent yourself in bankruptcy, but the better option is usually to touch base with a credible bankruptcy attorney licensed in Michigan. Bankruptcy is a complicated court procedure, and a mistake can mean the loss of your home, car, or other major assets. An attorney can examine your financial situation, explain your best path to relief, and be your legal representative throughout the process. In some instances, they can suggest an alternative debt relief option that’s a better fit.