Ann Arbor / Ypsilanti Bankruptcy Attorney Lander McLoyd discusses what you can keep if you file for bankruptcy in Michigan.
"Exemption" is the bankruptcy term that describes what you keep when filing for bankruptcy. You are allowed to exempt (keep) the basic assets that allow you to continue with a "fresh start." The bankruptcy code does not require you to sell off everything you have and live in destitution. You will still need a place to live, transportation and relief from debt so you can start over. For instance, bankruptcy may allow you to avoid foreclosure on your home. Your home would be your "exempt property." In filling out the forms to file bankruptcy the debtor (you) claims property as exempt. If no objections are filed to the exemptions, they become final 30 days after the first meeting of creditors. Exempt property is then no longer property of the bankruptcy estate.
The purpose of Chapter 7 of the bankruptcy code is to get a fresh start and that is only possible if the debtor has something with which to start. Household goods and personal effects are usually exempted because they have little resale value and do not offer a source of value for the bankruptcy trustee to take, sell and pay creditors.
Pension and retirement plans are excluded from the bankruptcy estate and therefore, not subject to the reach of the bankruptcy trustee. Since retirement plans are outside the estate, the debtor doesn't have to exempt them to keep them.
IRA's and other retirement savings may be property of the estate but are frequently exempt. The 2005 amendments to the Bankruptcy Code increased the exemption for IRA's for all debtors, regardless of state of residence, to $1 million ninety five thousand (1,095,000).
Contact our Michigan Bankruptcy Law Firm for a free bankruptcy consultation.