Many people fear that they will lose everything if they file a bankruptcy. This is not the reality. Certain property is considered exempt under the Bankruptcy Code, meaning it cannot be liquidated by the trustee. The type of property and the limits for the value that can be exempted depends on a variety of factors, including whether you are taking the state exemptions or the federal exemptions. An experienced bankruptcy attorney can assist you in determining what exemptions to use, and how it will impact the property you will have when you get your fresh-start.
Some states do not permit you to choose; you simply have to use the state exemptions. Michigan allows debtors to choose between the state exemptions and the federal exemptions, which allows flexibility and permits some amount of exemption planning prior to bankruptcy. There are some benefits to each exemption structure, but they cannot be combined. Michigan exemptions may allow you to protect the entire value of your home if it is jointly owned with your spouse. If you need that protection, you cannot then choose to take the higher federal exemption for household goods and furnishings. You can use one set of exemptions or the other.