If you are struggling with debt in Michigan, Chapter 7 bankruptcy can help because it allows you to get on with your life much faster and with a clean slate. During the process, the court will allow you to only sell some types of assets to clear your debt.
Non-exempt assets in Chapter 7
When you qualify for Chapter 7 bankruptcy in Michigan, the court will appoint a trustee to oversee your case. The trustee’s main role is to identify any non-exempt assets (properties not protected by state and federal law) that they can sell to pay off your creditors. These include:
- A house or other residential property that’s not your primary residence
- Rental properties
- Luxury items, such as expensive jewelry, collections or antiques
- Valuable vehicles that you have equity in (the difference between the car’s value and what you owe on it)
- Stocks, bonds and investment accounts
If you don’t have any of these properties, your case will be a “no asset” case, meaning there are no assets for the trustee to sell. In this situation, you will still be able to discharge your debts and get a fresh start.
Exempt assets in Chapter 7
Fortunately, Michigan has a generous list of assets that they will let you keep during Chapter 7 bankruptcy. These include:
- Your primary residence (up to $35,000 in equity)
- One car (up to $3,520 in equity)
- Earnings from wages or salary (up to 40-60% of your wages, depending on whether you are the sole breadwinner)
- Personal property, such as clothing, furniture and household goods (up to $3,825 in value)
- Worker’s compensation benefits
- Federal government benefits, such as social security and veteran’s benefits
Note that you can choose between federal or state exemptions, but you cannot mix and match. Federal exemptions are slightly lower for things, such as primary residence and car equity, but they do include wildcard exemptions that you can use for any asset.
Chapter 7 bankruptcy can provide much-needed relief when in debt, but if liquidating some of your most valuable assets is a concern, there are other options, such as Chapter 13 bankruptcy or debt negotiation. It’s important to understand the full implications of each option to make an informed decision based on your unique financial situation.