Kimberly Ross Clayson

What are Bankruptcy Exemptions Detroit

What are Bankruptcy Exemptions?

Bankruptcy exemptions are a set of laws that determine what property you may keep after filing bankruptcy. Bankruptcy exemptions exist in both Federal and state law. The different exemption laws vary and in Michigan you may generally choose to elect either Federal or State law exemptions. An exemption analysis is critical before choosing to file for bankruptcy.

In General

Most State and Federal exemptions generally include the following: homestead, personal property, payments needed to support yourself, qualified retirement accounts, and a “wildcard” exemption. Keep in mind, the exemptions are limited to certain dollar amounts, which are adjusted every 3 years for cost of living.

This means that you will not have to give up the shirt off your back to file bankruptcy. You are allowed to keep living essentials, a modest amount of personal property, and a limited interest in your residence. The “wildcard” exemption allows you to exempt anything, regardless of whether it falls under an exemption, up to a certain amount. If you have unused homestead exemption, you can generally use a portion of that towards your “wildcard” exemption.

Exemptions in Chapter 7 or Chapter 13?

Chapter 7 Bankruptcy is commonly referred to as a liquidation – that is, any property not covered under bankruptcy exemptions will be liquidated and used to pay your creditors. This is why an exemption analysis is critical. If you have a large amount of non-exempt property that you wish to retain, Chapter 13 bankruptcy might work better for you.

Chapter 13 Bankruptcy is a reorganization process that allows you to keep your property and pay back a portion of your debt through a payment plan. Since you are generally keeping your property in a Chapter 13 case, exemptions play a factor in determining how much you will have to pay (Learn more about Chapter 7 and Chapter 13 here).

Conclusion

Each case is unique, and an exemption analysis is the first step to determining whether or not you should file bankruptcy and, if so, which chapter you should file. Understanding proper exemption analysis is critical to a successful bankruptcy case. The information above is general in nature, and you should speak to a licensed bankruptcy attorney in your jurisdiction before filing bankruptcy.

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DISCLAIMER: The information contained above is general in nature and provided as reference material only. This information is not specific legal advice about the application of the law to a particular fact scenario, nor does it replace (or purport to replace) any requirement to obtain specific legal advice. This information is not intended to and does not create an attorney client relationship. If you require legal advice, that advice should always be obtained from a qualified legal practitioner in your jurisdiction.

 

Can I Keep My House If I File Bankruptcy Detroit

Can I Keep My House If I File Bankruptcy?

Ultimately it depends on your circumstances. It mostly depends on three factors: (1) which chapter of bankruptcy you are filing, (2) whether or not you can continue to pay your mortgage payments, and (3) whether or not you can exempt any equity you may have.

Chapter 7

Chapter 7 bankruptcy is likely the best option if you can exempt any equity you may have. Federal Bankruptcy law and Michigan common law contain homestead exemptions that allow you to keep a certain amount of value in your home despite filing bankruptcy. Chapter 7 provides a quicker way to wipe out your debts without having to make plan payments, like in Chapter 13. Keep in mind, however, that any non-exempt assets will be recovered and sold by the Trustee in Chapter 7 (Learn about exemptions here).

Remember, you must be able to afford your mortgage payments going forward, or else your mortgage company could foreclose. Foreclosure is a process that even bankruptcy cannot always stop (Learn about foreclosure here).

If you have DO HAVE non-exempt equity in your home, even if you are behind on your mortgage payments, Chapter 13 may be right for you.

Chapter 13

In most cases, you may keep your home in Chapter 13 bankruptcy. Chapter 13 allows for payments to be made on missed mortgage payments through a repayment plan, even if you have equity in the property. Repayment plans are generally 3-5 years, which provides breathing room for many debtors to catch up on their late payments. The Automatic Stay protects you from foreclosure as long as you make your plan payments in full and on time.

Another benefit of chapter 13 is getting rid of second mortgages. In some cases, when the first mortgage balance exceeds the value of the home, a debtor may remove the second mortgage from the home through an action called “lien stripping”. A successful lien strip allows the second mortgage holder to be treated as an unsecured creditor, which generally gets paid much less through your repayment plan.

Conclusion

In some cases, you may keep your home if you file bankruptcy. Each case is unique, however, and the information provided above could not possibly cover every possible scenario. The information above is general in nature, and you should speak to a licensed bankruptcy attorney in your jurisdiction before filing bankruptcy.

Schedule a Free Consultation

 

DISCLAIMER: The information contained above is general in nature and provided as reference material only. This information is not specific legal advice about the application of the law to a particular fact scenario, nor does it replace (or purport to replace) any requirement to obtain specific legal advice. This information is not intended to and does not create an attorney client relationship. If you require legal advice, that advice should always be obtained from a qualified legal practitioner in your jurisdiction.