Commencement of a bankruptcy case creates an estate. The estate technically becomes the temporary legal owner of all the debtor's property. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor's creditors are paid from nonexempt property of the estate.

In Michigan, as in all states, the commencement of a bankruptcy case creates a bankruptcy estate, which is governed by federal law under the Bankruptcy Code. This estate becomes the temporary legal owner of the debtor's property and includes all legal or equitable interests of the debtor in property at the time the bankruptcy case is filed. This encompasses not only property directly owned by the debtor but also property held by others in which the debtor has an interest. The estate is managed by a bankruptcy trustee, who is appointed to oversee the case. The trustee's role includes liquidating any nonexempt assets and distributing the proceeds to creditors according to the priorities established in the Bankruptcy Code. Exemptions allow the debtor to keep certain property out of the estate, protecting it from liquidation. These exemptions are determined by a combination of federal statutes and Michigan state law, as debtors in Michigan can choose between federal and state exemption schemes. The specific exemptions that apply can significantly affect which assets are available to pay creditors and which are protected for the debtor's use post-bankruptcy.