Exemptions

Individuals in bankruptcy can exempt certain kinds of property from the bankruptcy estate under either the Federal Exemptions or the State Exemptions.

THE FEDERAL EXEMPTIONS INCLUDE THE FOLLOWING:

Residence: $21,625 of the Debtor's equity in a residence. Up to $10,825 of unused residence exemption may be used to exempt any property. This "excess residence" exemption is often used to shield non-exempt property. Important: under the state exemptions, all the equity in any entireties property (titled in the name of husband and wife) may be exempt without limit.

Motor Vehicle: $3,450 of the equity in one motor vehicle. Leased cars are technically an asset, but are routinely ignored by trustees. The debtor usually "reaffirms" the lease and keeps the car. Same for heavily financed cars. Motor vehicles are not exempt under the state exemptions (unless it's a "tool of the trade").

Household Goods: $11,525 in aggregate (not to exceed $550 in any particular item) of the following property held primarily for personal, family or household use: household goods, wearing apparel, appliances, books, animals, crops, musical instruments. Under the state exemptions, all clothes (furs and all) are exempt but household furniture is limited to only $3,000.

Jewelry: $1,450 in jewelry.

Wild Card: $1,150 in any property. This "wild card" exemption can be combined with up to $10,825 of the unused residence exemption to shield any non-exempt property.

Tools of the Trade: $2,175 which includes tradesman's hand tools, doctor's car, lawyer's books.

Term Insurance: Any unmatured life insurance contract. Usually ignored by trustees unless it "matures" during the bankruptcy. Includes group insurance but not credit life. Important: Bankruptcy estate includes insurance proceeds payable to debtor within 180 days after filing Petition.

Whole Life Insurance: $11,525 in loan value of a policy owned by Debtor on life of Debtor or dependent. Only one $10,775 exemption is allowed regardless of how many policies are owned. Under the state exemptions, all the cash surrender value of all policies may be exempt if spouse or children are beneficiaries.

Disability Insurance: The right to receive disability, illness or unemployment benefit.

Alimony: To the extent necessary for support of Debtor and dependents.

Retirement Plans: Payment under stock bonus, pension, profit-sharing, annuity or similar plan, or contract, on account of illness, disability, death, age or length of service, but only to the extent necessary for the support of the debtor and debtor's dependents. Remember, qualified ERISA plans may have been excluded from the bankruptcy estate in the first instance. Under state exemptions, most retirement plans are totally exempt.

Misc: There are a myriad of lesser miscellaneous exemptions.

Certain kinds of property are exempt from collection by judgment creditors and can be excluded from the bankruptcy estate under the State Exemption laws.

THE STATE EXEMPTIONS INCLUDE THE FOLLOWING:

In General: Anything that's exempt under state or federal non-bankruptcy law. The Michigan exemption laws, as discussed below, invariably predominate.

Real Estate: Real estate in the names of both husband and wife as tenants by the entirety is exempt from the individual creditors of the individual spouse BUT NOT from joint creditors. Unlike the federal exemptions, this is not limited to a residence but includes all entireties property from commercial buildings to raw land. If the real estate is a home, then there is an additional homestead exemption of $30,000. If the debtor is 65 or older or disabled, then the homestead exemption is $45,000.

Personal Property: The following personal (non real estate) property owned jointly by husband and wife is exempt from the individual creditors of the individual spouse BUT NOT from joint creditors: bonds, certificates of stock, mortgages, promissory notes, evidence of indebtedness. Joint bank accounts are not "evidences of indebtedness" and are not protected by the statute. It is presumed that each spouse owns ½ of the bank account.

Clothes: All clothes excluding furs.

Motor Vehicle: $2,775 in one motor vehicle.

Household Goods & Jewelry: $3,000 of household goods, furniture, utensils, books, appliances, and jewelry, not to exceed $450 for any one item.

Tools of the Trade: $2,000 of tools, materials and other personal property necessary to earn a living.

Disability Insurance: Benefits paid by any stock or mutual life or health or casualty insurance company, on account of disability due to injury or sickness of any insured person.

Retirement Plans: With qualifications, includes most IRAs, plans qualified under §401 of the Internal Revenue Code subject to ERISA (pension, profit-sharing, stock bonus, etc), and annuities under §403(b), except for contributions within 120 days of filing bankruptcy, and orders for child support, and orders pursuant to a judgment of divorce or separate maintenance. This is a complex and volatile area.

Life Insurance: Generally, the cash surrender value of all policies owned by the debtor and payable to the spouse or children will be exempt, however, recent decisions by bankruptcy judges in Michigan have held that life insurance is no longer exempt.

Misc: There are a myriad of lesser miscellaneous exemptions.