If you file bankruptcy, you want to know if you can
keep your home. You want to know, what is the home
Home Bankruptcy State Exemptions In Michigan
Michigan has home exemption choices for folks who file bankruptcy here.
Tenancy by entireties is available as one option.
That is a fancy legal term for a married couple. If you are married, and own your home as husband and wife, with NO ONE else, that is tenancy by the entireties.
And, your home is exempt. EXCEPT from joint creditors.
The legal theory is the husband is one entity, the wife is another, and, together, they form a third entity that owns property as tenants by the entireties. So, only creditors of that third entity, husband and wife together, can get at property held as tenants by entireties.
The other home exemption in Michigan law is for $37,775, unless you are over 65, in which case the exemption bumps up to $56,650.
I have one client who filed just before turning 65, and that case was dismissed.
So, I re-filed a bankruptcy case for her and she gets the higher home exemption.
Federal Home Exemption
In Michigan, you can choose the federal exemptions, and the home exemption is currently $23,675.
The rest of the federal exemptions are better than the state choices; you need a bankruptcy expert to do this for you if you are filing bankruptcy.
Home Exemption – What Is Being Claimed Exempt?
I am glad you asked.
The equity in a home, or any other asset, is what can be claimed as exempt.
Equity is the value of the home, minus any liens.
A mortgage is a lien. And, home equity loans are mortgages. “Home equity loan” is just a marketing term they came up with, partly to conceal that you were pledging your home as collateral for the loan.
In Michigan, as in most states, unpaid property taxes are a lien on the home. Also here, unpaid water bills become a lien on the home.
There may be assessments, for sidewalks or such, that are also government/statutory liens.
This is not a complete list.
So, if your home is worth $100,000, with a $70,000 mortgage, and $1,500 in unpaid overdue property taxes, and $500 in past due water bills, you have:
$28,000 in equity that needs to be used as home exemption to keep the bankruptcy trustee from selling your home to raise money to pay creditors.
That is more than the Federal home exemption. Unless, you own your home with your spouse, (or jointly with someone else) in which case only half the equity, $14,000, is yours, and you can use the Federal home exemption.
Do NOT try this at home.