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What Happens to Your Assets in Michigan If You File Bankruptcy: Protected vs. Non-Protected

By Roxane Kaye • 01/22/2026

One of the most common questions Michigan residents ask before filing bankruptcy is:

“Will I lose my house, car, or personal property if I file?”

The answer depends on whether your assets are protected (exempt) or non-protected (non-exempt) under Michigan bankruptcy law. Understanding this distinction can help you make informed decisions and prepare for the bankruptcy process with confidence.

At Kaye Law Office, PLLC, we help individuals and families across Fenton, Grand Blanc, and Genesee County navigate bankruptcy while protecting what matters most.

1. Understanding Bankruptcy Exemptions in Michigan

When you file bankruptcy, all of your assets become part of the bankruptcy estate—but that doesn’t mean you’ll lose everything. Bankruptcy laws allow you to keep certain property through exemptions, which are designed to help you maintain a reasonable standard of living after filing.

In Michigan, you can choose between state exemptions and federal exemptions—but you must stick with one set. An experienced Michigan bankruptcy attorney can help you decide which system best protects your property.

2. Protected (Exempt) Assets in Michigan Bankruptcy

Here are some of the most common assets Michigan residents can typically protect when filing bankruptcy:

a. Your Home (Homestead Exemption)

  • Under Michigan’s homestead exemption, you can protect up to $45,000 in equity in your primary residence (or $68,350 if you’re over 65 or disabled).

  • This means if your home’s value minus your mortgage is within that limit, you can usually keep it.

b. Your Vehicle

  • You can generally protect up to $3,525 in equity in one motor vehicle.

  • If your car is financed, and your equity (value minus loan) is below this limit, it’s considered protected.

c. Household Goods and Personal Property

  • Michigan allows exemptions for furniture, clothing, electronics, and personal items up to certain limits—usually around $700 per item and $4,000 total for household goods.

d. Retirement Accounts

  • Most qualified retirement accounts—such as 401(k)s, IRAs, and pensions—are fully protected under both state and federal law.

e. Tools of the Trade

  • If you use tools, equipment, or materials for your job or small business, you can typically exempt up to $2,525 in value.

f. Public Benefits and Insurance

  • Social Security, unemployment benefits, workers’ compensation, and disability payments are generally protected from creditors.

These protected assets allow you to maintain stability while getting relief from overwhelming debt.

3. Non-Protected (Non-Exempt) Assets

Not all property is exempt. Assets considered non-protected may need to be sold by the bankruptcy trustee to repay creditors (in Chapter 7 cases). Examples include:

  • Second homes, vacation property, or investment real estate

  • Luxury vehicles or boats

  • Expensive jewelry or collectibles

  • Large amounts of cash or money in non-retirement accounts

  • Certain valuable personal property that exceeds exemption limits

However, in Chapter 13 bankruptcy, you typically keep all of your assets but must repay creditors through a structured repayment plan.

4. Choosing Between Chapter 7 and Chapter 13 in Michigan

The type of bankruptcy you file affects what happens to your assets:

  • Chapter 7 (Liquidation): Non-exempt property may be sold by the trustee, but many Michigan residents keep most or all of their belongings through exemptions.

  • Chapter 13 (Reorganization): You keep your property and make affordable monthly payments over three to five years.

At Kaye Law Office, PLLC, we help clients evaluate which chapter best fits their financial and personal goals.

5. How a Michigan Bankruptcy Attorney Can Help Protect Your Assets

Bankruptcy laws are complex, and exemption amounts change periodically. The way your property is titled, valued, or financed can determine whether it’s protected.

A skilled bankruptcy lawyer in Michigan can:

  • Review your full list of assets and debts

  • Identify the best exemption system for your situation

  • Help you legally maximize the assets you can keep

  • Guide you through Chapter 7 or Chapter 13 filings step by step

With careful planning, most Michigan filers keep their homes, cars, and retirement savings.

6. Moving Forward: Protecting Your Fresh Start

Filing for bankruptcy is not the end—it’s the beginning of a fresh financial start. Knowing what’s protected vs. non-protected helps you approach the process with confidence and clarity.

At Kaye Law Office, PLLC, we work with Michigan residents to preserve their assets, reduce debt stress, and move toward a stronger financial future.

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