Bankruptcy exemptions protect the equity in your property from creditors and the bankruptcy court—preventing the equity from being used to pay your creditors. Equity is the value of property after you subtract the amount of any liens against the property from its fair market value.

The equity in your home is one such asset in bankruptcy. And bankruptcy exemptions—including the homestead exemption—allow you to protect the property you will need to maintain a home and employment after bankruptcy.

Bankruptcy exemption amounts vary by state, so the amount you will be able to protect will depend on where you live and the type of bankruptcy you file (Chapter 7 or Chapter 13).

In Michigan, bankruptcy exemptions allow individuals to protect certain property from creditors when they file for bankruptcy. The homestead exemption specifically protects equity in a debtor's primary residence. As of the knowledge cutoff in 2023, Michigan allows debtors to choose between state-specific exemptions or the federal bankruptcy exemptions, but they cannot mix and match between the two systems. The Michigan homestead exemption amount is adjusted periodically, but it generally allows an individual to exempt up to a certain amount of equity in their home. The amount of the exemption may differ for individuals, married couples, elderly or disabled debtors, and may also vary depending on whether the debtor has dependents. It's important to note that these exemption amounts can change, so it's advisable to consult with an attorney for the most current figures. Additionally, the type of bankruptcy filed—Chapter 7 or Chapter 13—can affect how exemptions are applied and what property can be retained by the debtor.