An Update on Michigan’s Bankruptcy Exemptions — And Why It Matters for Your Fresh Start

If you’re like most people considering bankruptcy, you probably have one big question in mind: What can I keep? After all, bankruptcy is designed to give you a fresh start — not take away the essentials you need to rebuild your life.

That’s why bankruptcy exemptions matter so much. And in Michigan, these protections have been a hot topic lately — sparking political debates, court battles, and more than a few headaches for everyday people and the attorneys who guide them.

Recently, our firm’s own Attorney Michael Brown was invited to share his insight on this very issue at the West Michigan Chapter of the Federal Bar Association’s 37th Annual Summer Bankruptcy Seminar. Alongside respected colleagues Alexander J. Berry-Santoro (Maxwell Dunn Law) and Karen E. Evangelista (Karen E. Evangelista P.C.), Michael took a deep dive into Michigan’s exemption updates — and the unexpected pitfalls that can come with them.
 

Why Do Bankruptcy Exemptions Matter?

When you file for Chapter 7 bankruptcy, certain state or federal laws decide what you can keep through the process — your house, car, household goods, retirement accounts, and more. These protected assets are called “exempt property.” Everything else is generally considered fair game for creditors or the bankruptcy trustee to seize and sell to satisfy your debts.

In short: exemptions are your legal safety net. Without them, filing for bankruptcy wouldn’t offer the fresh start it’s designed to provide.
 

Last year, Michigan’s Legislature did something that hasn’t happened in decades: they updated our state’s bankruptcy exemptions to better reflect the cost of living today. The proposed changes would significantly raise the dollar amounts people could protect:

• Homestead Exemption: Up from $46,125 to $125,000 per filer — meaning a married couple could protect up to $250,000 in home equity.
• Vehicle Exemption: Increasing from $4,250 to $15,000 — crucial for many people whose car is their lifeline to work, school, or medical care.
• Wildcard Exemption: Michigan currently doesn’t offer a “wildcard” exemption, which lets you protect property that doesn’t fit neatly into other categories. The new law would finally provide this important safety valve.

So, What’s the Holdup?

Sounds straightforward, right? Unfortunately, politics got in the way.

After both chambers of the Michigan Legislature approved the changes, an election shifted control of the House. The new House leadership has been unwilling to deliver the passed legislation — including the exemption update — to the Governor’s desk for signature.

This unusual gridlock led to a lawsuit by the Michigan Senate to force the House to hand over the bills. A state court agreed the bills should move forward — but didn’t compel the House to act. Now, the legal battle sits in the Michigan Court of Appeals, with many expecting it will eventually reach the Michigan Supreme Court.

So, for now, the new exemptions are on hold. And Michigan filers must still rely on the older, lower exemption amounts if they are filing for a Chapter 7 bankruptcy in Michigan.
 

Hidden Pitfalls Even Experienced Bankruptcy Attorneys Miss

One reason Attorney Michael Brown was invited to speak at this respected seminar is that he’s spent years helping Michigan families navigate these tricky rules. And he knows from experience that exemptions aren’t always as simple as they look — especially when politics and federal law collide.

Some pitfalls people often overlook include:

• Pre-bankruptcy planning: Using non-exempt cash to pay down your mortgage shortly before filing can backfire. The Bankruptcy Code can limit or even undo these moves if they’re seen as unfair to creditors.
• State-to-state moves: If you moved to Michigan recently, the federal Bankruptcy Code may cap how much home equity you can protect, even if Michigan’s new higher exemptions eventually become law.
• “Bad acts” caps: If there’s any hint of fraud, concealment, or other misconduct, the courts can significantly reduce your protection — no matter how high the exemption limit.

Under Michigan’s current lower exemptions, these caps rarely come into play because the amounts people can protect are already modest. But if the new, higher exemptions take effect, these pitfalls could quickly catch more filers — and many might not realize it until it’s too late.
 

What Are My Options If I Can’t Protect All of My Important Assets With the Current Bankruptcy Exemptions?

With no clear timeline for when — or if — Michigan’s bankruptcy exemptions will increase, many people feel caught in the middle. You might be thinking, “I want a fresh start, but I also don’t want to lose my home or the things I’ve worked hard to build.”

Here’s the good news: Chapter 13 bankruptcy can be a powerful option when Chapter 7 doesn’t provide enough protection for your assets.

Unlike Chapter 7, which requires you to fit within strict exemption limits to avoid asset liquidation, Chapter 13 is a debt reorganization plan. It allows you to keep everything you own — even if your home equity, vehicle value, or other assets exceed the current exemption thresholds. Instead of selling property, you propose a structured repayment plan, usually lasting 3 to 5 years, based on your budget and ability to pay.

Better yet, you often pay back only a portion of your unsecured debt — often just a small fraction of what you owe — and the rest is legally discharged at the end of your Chapter 13 plan. Creditors are required to stop all collection activity as soon as you file, giving you both immediate legal protection and peace of mind.. That means no more harassing calls, lawsuits, or threats of foreclosure or repossession while you're under the court’s protection.

Chapter 13 is especially helpful for:

• People with home equity that exceeds exemption limits
• Those who have fallen behind on mortgage or car payments but want to catch up and avoid foreclosure or repossession
• Debtors with tax debt, child support arrears, or other special obligations that can’t be discharged in Chapter 7
• Individuals who want to protect co-signers

If you’re worried about losing your home or personal property under Chapter 7, Chapter 13 gives you a structured, manageable way to resolve your debt while holding onto what matters most. Call us today at 866-261-8282 or schedule a free consultation online to talk with one of our Chapter 13 bankruptcy specialists.

Take the first step toward peace of mind.

We’ll connect you with a debt relief attorney for a free, no-pressure consultation.

Why Our Firm Stays Ahead of the Curve

Events like the Summer Bankruptcy Seminar remind us that the law is always evolving — and that trusted, experienced legal guidance can make all the difference.  We’re proud that Attorney Michael Brown was invited to present at one of Michigan’s leading legal seminars. His expertise reflects our firm’s broader commitment to staying current with legislative changes and protecting our clients at every step.

When you’re choosing a bankruptcy law firm, you deserve a team that understands the fine print, the politics, and the practical realities — and knows how to protect you and your family every step of the way.  When you choose Acclaim Legal Services, you’re choosing experience, compassion, and deep knowledge of Michigan’s bankruptcy system — even when the laws are in flux.
 

Wondering What You Can Protect? Let’s Talk.

At the end of the day, bankruptcy is about giving you a clean slate — not stripping away your chance to rebuild. But getting that protection right takes careful planning and deep knowledge of both state and federal law.

If you’re considering bankruptcy and worried about your home, car, or other assets, don’t wait and wonder. Talk to an experienced bankruptcy attorney who knows Michigan’s rules inside and out — and who’s helping shape the conversation about how they’ll change.

Questions? We’re here to help you find peace of mind and a clear path forward. Reach out today at 866-261-8282 or schedule a free consultation online to learn how we can help protect what matters most.