Contrary to popular belief, bankruptcy seldom means having all your property and assets stripped away to pay your debts. For most people, that simply isn’t the reality.
Even if you do have some items of significant value, there are exemptions that allow you to keep much of what you have.
Here are some things you should know about common exemptions:
1. You generally can keep your primary vehicle, as long as the equity in it is below a certain amount. Sports cars and collector cars are generally going to be forfeited.
2. You can keep your personal clothing, with the exception of furs. Most furs have a significant resale value. However, the trustee may or may not choose to seize a fur that’s outdated or in poor shape.
3. You can usually keep your personal jewelry and household furniture, up to a certain value. Unless your household goods and jewelry have been appraised, you can generally value things for what you would get for them if you tried to resell them. If you’ve ever had a yard sale, you probably realize that isn’t very much.
4. You can usually keep your computer, as long as its resale value is under $500.
5. You can often keep tools or equipment necessary to practice your trade.
6. Pension and retirement accounts are generally protected, with very few exceptions.
In Michigan, you can choose either the exemptions afforded under federal law or those granted under state law, whichever is more advantageous to you. You may also have the option to pay the trustee the value of an item you wish to keep if it isn’t exempt — so if a family heirloom is a concern, there are options available to you.
The lesson here is that bankruptcy shouldn’t be feared. The process is designed to give people a chance to rebuild — which means that the law recognizes that stripping them of all their assets is actually counterproductive. There are many exemptions available that can allow you to avoid asset forfeiture as you start to rebuild your life. If you’re concerned, consider talking to an attorney about the process.
Source: www.legislature.mi.gov, “Section 600.5451,” accessed March 15, 2018