Michigan Chapter 7 Bankruptcy Exemptions: Home, Vehicle, and Wages

If you file Chapter 7 in Michigan, you choose between two sets of Michigan Chapter 7 bankruptcy exemptions: the state list under MCL 600.5451 or the federal list under 11 U.S.C. § 522(d). For cases filed on or after April 1, 2026, Michigan’s state exemptions protect up to $51,150 in home equity, $4,725 in vehicle equity, and $5,125 in household goods, along with uncapped protection for retirement plans, necessary clothing, health aids, and family photographs.¹ The federal alternative has a smaller homestead but adds a wildcard that renters and low-equity homeowners often find more valuable.

State or Federal: Which Set to Pick

Michigan is an opt-in state, which means you can use either the state exemptions or the federal exemptions.² You cannot mix the two. It is one system or the other for your entire filing, and married couples filing jointly must pick the same set.³

The right answer depends on what you own. Homeowners with real equity usually do better with the state list because the Michigan homestead reaches $51,150 (or $76,725 if you or a dependent is 65 or older or disabled), compared with $31,575 under federal law.¹ Renters and low-equity owners usually do better with the federal list, because federal law offers a wildcard of $1,675 in any property plus up to $15,800 of unused homestead allowance, for as much as $17,475 to apply wherever you need it.⁴ Michigan has no wildcard.

The two sets compare like this across the categories that matter most:

Homestead: Michigan $51,150 ($76,725 if elderly or disabled); federal $31,575
Vehicle: Michigan $4,725; federal $5,025
Household goods: Michigan $775 per item and $5,125 total; federal $800 per item and $16,850 total
Jewelry: Michigan lumps it into the household-goods cap; federal gives it a separate $2,125
Tools of trade: Michigan $3,400; federal $3,175
Wildcard: Michigan none; federal $1,675 plus up to $15,800 of unused homestead

Run the numbers both ways before you commit. People who default to the state set without checking often lose thousands in personal-property coverage they could have claimed under the federal wildcard.

Home Equity

The homestead exemption shields equity in your primary residence from the trustee. Equity means your home’s current market value minus the mortgage balance and any other liens. Under the state list for cases filed on or after April 1, 2026, you can protect up to $51,150, rising to $76,725 if you or a dependent is 65 or older or disabled.¹

Michigan adjusts these figures every three years using the Detroit-area Consumer Price Index, rounded to the nearest $25, with the new numbers taking effect the following April 1.² If you file before an adjustment date, the prior period’s lower amounts apply, so the timing of your petition can affect how much equity you keep.

One federal cap applies no matter which set you choose. If you bought your home within 1,215 days (about 40 months) before filing, 11 U.S.C. § 522(p) limits the homestead exemption to $189,050. The rule exists to stop people from pouring money into a new home right before bankruptcy to shelter it.³

Vehicle Equity

Michigan’s state exemption protects up to $4,725 of equity in one motor vehicle as of April 2026.¹ The federal cap is slightly higher at $5,025.⁴ Equity is the car’s fair market value minus the loan balance. A $12,000 car with $9,000 still owed has $3,000 in equity and sits well under either cap.

If your equity exceeds the exemption, the trustee can sell the car, pay you the exempt amount, and send the rest to creditors. For a financed vehicle, a reaffirmation agreement with the lender can let you keep the car by continuing to pay. That option is covered further below.

Household Goods, Tools, and Other Personal Property

Michigan’s state exemptions cover personal property in separate categories, each with its own cap. The 2026 adjusted amounts under MCL 600.5451 are:²¹

Household goods, furniture, appliances, books, and jewelry: $775 per item, $5,125 total
Tools of the trade: $3,400 for implements, materials, and equipment used in your job or business
One computer and accessories: $875
Household pets: $875
Crops, farm animals, and feed: $3,400

Several categories carry no dollar limit. Family photographs, necessary clothing (furs excluded), and professionally prescribed health aids are fully exempt, and up to six months of food and fuel for your household is also protected.²

Jewelry is where the state and federal lists part ways most noticeably. Michigan pulls it inside the $775-per-item, $5,125-total household-goods cap. Federal law gives jewelry its own $2,125 exemption on top of a $16,850 household-goods allowance.⁴ If you have meaningful personal property but little home equity, that gap alone can drive the choice.

Retirement Accounts

Retirement savings get strong protection either way. ERISA-qualified plans, including 401(k)s, 403(b)s, pensions, and profit-sharing accounts, have no dollar cap and sit outside the bankruptcy estate entirely.³

Traditional and Roth IRAs are also protected, with one Michigan wrinkle: amounts you contributed within 120 days before filing are not exempt under the state list.² Federal exemptions cap IRA protection at $1,711,975 across all IRA accounts combined. That ceiling is irrelevant for most filers, but anyone with a very large IRA balance gets more coverage from Michigan’s uncapped treatment.

Wages and Disability Income

Wages you earn after you file generally are not part of the bankruptcy estate. For earnings already paid, federal wage-garnishment law protects at least 75% of your weekly disposable earnings. Under 15 U.S.C. § 1673, the garnishable amount cannot exceed the lesser of 25% of disposable earnings or the amount by which weekly earnings exceed 30 times the federal minimum wage ($7.25 per hour, so $217.50 per week).⁵⁶ Michigan separately exempts disability insurance proceeds paid because of injury or sickness.²

How to Claim Your Exemptions

Your exemption claims live in the bankruptcy schedules you file with the court. Under Federal Rule of Bankruptcy Procedure 1007, you file the schedules with your petition or within 14 days after it.⁷ You list every asset, its value, and the exemption you’re claiming for each one, and you declare whether the state or federal set applies.

Accuracy is not optional. If you leave an asset off, the trustee can later challenge your claim to exempt it. If you leave a debt off, it may not be discharged.⁸ Honest mistakes can often be fixed by amending the schedules; intentional omissions can cost you the discharge entirely.

Expect to attend a Section 341 meeting of creditors about 20 to 40 days after filing. The trustee runs it, not a judge, and creditors rarely appear. You answer questions under oath about your schedules, including how you valued property and which exemptions you claimed.⁹ Bring documentation for your values, especially a recent mortgage statement and a vehicle valuation.

Keeping Secured Property Through Reaffirmation

If you want to keep a financed car, your mortgaged home, or other secured property, you may need to sign a reaffirmation agreement with the lender. The agreement is a new contract that makes you personally liable for the debt again, in exchange for the lender agreeing not to repossess as long as you keep paying.¹⁰

The agreement has to reach the court within 60 days after the first date set for the 341 meeting.¹¹ You submit a statement of income and expenses with it. If the math shows you cannot afford the payments, a presumption of undue hardship arises and the court may hold a hearing and reject the agreement.

You can rescind a reaffirmation at any time before your discharge is entered, or within 60 days after the agreement is filed, whichever is later.¹⁰ Think hard before signing. If you reaffirm a car loan and later cannot pay, the lender can repossess and pursue you for any deficiency as if bankruptcy had never happened. When an attorney represents you in the negotiation and signs a declaration that the agreement does not impose undue hardship and that you were fully advised, the court will usually skip a separate hearing. Without a lawyer, the court has to independently approve the deal as being in your best interest.

1
State of Michigan. Inflation Adjustments Bankruptcy Exemptions – March 2026
2
Michigan Legislature. Michigan Code 600.5451 – Bankruptcy Exemptions From Property of Estate
3
Office of the Law Revision Counsel. 11 US Code 522 – Exemptions
4
Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases
5
Office of the Law Revision Counsel. 15 US Code 1673 – Restriction on Garnishment
6
U.S. Department of Labor. Fact Sheet 30 – Wage Garnishment Protections of the Consumer Credit Protection Act
7
Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 1007 – Lists, Schedules, Statements, and Other Documents; Time to File
8
U.S. Trustee Program. Bankruptcy Information Sheet
9
United States Department of Justice. Section 341 Meeting of Creditors
10
Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge
11
Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 4008 – Reaffirmation Agreement and Supporting Statement