If you’re a debtor looking into bankruptcy options, you’re certainly concerned about losing assets. For people who want to protect property, a primary question will be: What does non-exempt mean in a Michigan bankruptcy?
Non-exempt property in a Michigan bankruptcy includes assets not protected under state or federal exemptions, such as luxury items, second homes, or high-value collectibles. These assets may be sold in Chapter 7 to repay creditors or calculated into a repayment plan in Chapter 13.
As a Michigan bankruptcy lawyer with extensive experience in Chapter 7 and Chapter 13, I’ve assisted countless clients in understanding and applying exemptions to maximize outcomes. In this article, I’ll break down how exemptions work, what property is not exempt, and important bankruptcy strategies.
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FAQs About Non-Exempt Assets in Michigan Bankruptcy
What is exempt from bankruptcy in Michigan?
In Michigan, exempt property includes assets protected by state or federal bankruptcy laws. Common exemptions include equity in a primary residence under the homestead exemption, one vehicle up to $3,775, necessary clothing, household goods up to $600 per item, tools of the trade up to $2,525, and certain retirement accounts like IRAs and 401(k)s. These exemptions allow filers to retain essential assets necessary for maintaining a basic standard of living.
What is the difference between exempt and non-exempt assets?
Exempt assets are protected under bankruptcy laws and cannot be seized or sold by the trustee to repay creditors. These typically include homes, vehicles, and retirement accounts up to specified limits. Non-exempt assets, on the other hand, fall outside the scope of legal protections and may be sold in Chapter 7 bankruptcy to satisfy debts. Examples of non-exempt assets include luxury items, second properties, or high-value collectibles.
What does exemption mean in bankruptcies?
In bankruptcies, an exemption refers to the legal protection that shields certain assets from being sold to pay creditors. Exemptions allow individuals filing for bankruptcy to retain the essential property needed for daily living and financial recovery. Both federal and Michigan-specific exemptions apply to assets like homes, vehicles, and personal belongings, helping filers start over without losing everything.
What is nonexempt property in Chapter 13?
In Chapter 13 bankruptcy, non-exempt property is not subject to liquidation. Instead, the value of non-exempt assets is considered when creating the repayment plan. Debtors must pay creditors an amount equal to the value of their non-exempt assets over the repayment period. Unlike Chapter 7, Chapter 13 allows individuals to retain all property, including non-exempt assets, as long as the repayment terms are met.
