March 28, 2023

Volume XIII, Number 87


March 27, 2023

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Michigan Bankruptcy Exemptions Set to Rise Significantly on March 1

As we reported last year, every three years on April 1, the dollar amounts in the Bankruptcy Code are adjusted to account for inflation. The federal dollar amounts last were increased on April 1, 2022, and are not slated for another increase until April 2025.

Michigan bankruptcy exemptions also increase every three years to adjust for inflation, and on March 1, 2023, they will increase by 14%. (For reference, the increase three years ago was approximately 6%). A bankruptcy debtor in Michigan may choose whether to use the exemptions provided under either federal or state law to "exempt" a certain amount of property from the bankruptcy estate and use it for a fresh start.

Most Michigan debtors who file for bankruptcy protection rely on the federal Bankruptcy Code exemptions because they usually provide the most protection in aggregate. Some, however, will opt for the state-specific exemptions because they provide greater protection for specific assets the debtor wishes to shield. For example, the federal exemption for equity in a debtor’s residence is currently $27,900. The corresponding Michigan state exemption for most debtors is currently $40,475 and will rise to $46,125 on March 30, 2023. The Michigan exemption for those who are over age 65 or disabled will rise from the current value of $60,725 to $69,200. Thus, unmarried debtors with home equity sometimes find the state exemptions more favorable. The comparison is slightly more complicated for married couples, but similar logic applies. For these and other similar reasons, both debtors and creditors should take notice when the Michigan exemption limits are adjusted.

© 2023 Miller, Canfield, Paddock and Stone PLC National Law Review, Volume XIII, Number 38

About this Author

Ronald Spinner Bankruptcy Lawyer Miller Canfield

Ron Spinner brings extensive business experience to his bankruptcy practice, developing results-oriented strategies and breaking new legal ground where necessary to do so.

Indeed, Ron's ability to deal with novel situations helped tremendously in the City of Detroit bankruptcy case, where questions of first impression arose regularly. His ability to navigate the unique aspects of chapter 9 aided (and continues to aid) the City in its recovery.

As another example, Ron represented a creditor who "factored" the debtors' invoices. Courts typically characterize factoring as a "...

Marc N. Swanson Bankruptcy Attorney Miller, Canfield, Paddock and Stone Detroit, MI

Marc Swanson is the deputy group leader of the Bankruptcy Group at Miller Canfield. He specializes in representing debtors, lenders, creditors, equity holders and unsecured creditors' committees in bankruptcy cases and related litigation in Michigan and throughout the country. Marc has extensive experience in the municipal, energy, automotive, banking and building supply industries.

Marc is currently the lead attorney for the City of Detroit in its bankruptcy case. In this role, Marc argued and won two bankruptcy appeals at the U.S. 6th Circuit Court of Appeals for the City. One of...