Will You Lose Your House If You File Bankruptcy in Michigan
Facing bankruptcy in Michigan raises a critical question: “If I file bankruptcy, what happens to my house?” In most cases, you can keep your house in Michigan when filing for bankruptcy if you are current on your mortgage and your equity is protected under Michigan’s homestead exemption. You may also keep your home by using Chapter 13 to catch up on missed payments or by reaffirming your mortgage in Chapter 7.
For clear, personalized bankruptcy advice, call us at 877-586-1829. With 15 years of experience and over 10,000 clients served, our team is here to help protect your rights during the bankruptcy process.
In this article, I’ll explain your rights, exemptions, foreclosure timelines, Chapter 7 and 13 strategies, reaffirmation agreements, and next steps to protect your home while resolving debt.
What Happens to Your House If You File Bankruptcy in Michigan?
When you file bankruptcy, the court imposes an automatic stay that immediately halts foreclosure, collection calls, and wage garnishments. If you’re wondering, “Do you lose your house in bankruptcy?”, the answer depends on your payment status and how much home equity you have. In Chapter 7, you may keep your home if you are current on your mortgage and your equity does not exceed Michigan’s homestead exemption. In Chapter 13, you can catch up on missed mortgage payments through a structured repayment plan while protecting your property.
Can You File Bankruptcy and Keep Your House in Michigan?
Many homeowners ask, “Can I file bankruptcy and keep my house?” Yes — if your home’s equity is protected under the exemption and you stay current on your mortgage. Filing Chapter 7 or Chapter 13 gives you tools to discharge unsecured debt while maintaining home ownership.
How Chapter 13 Bankruptcy Helps Protect Your Home in Michigan
Chapter 13 bankruptcy can stop foreclosure while allowing you to repay missed mortgage payments over 3–5 years. You must demonstrate stable income to manage repayment while maintaining regular mortgage payments. Many Michigan homeowners use Chapter 13 when they’ve fallen behind due to job loss or medical bills — it’s designed to help you keep your house.
Chapter 7 vs. Chapter 13 for Protecting Your Home in Michigan
If you are deciding between Chapter 7 and Chapter 13, understanding how each impacts your ability to keep your home is essential. This comparison helps Michigan homeowners evaluate which bankruptcy chapter aligns best with their goal of protecting their house while managing debt.
| Feature | Chapter 7 Bankruptcy | Chapter 13 Bankruptcy |
|---|---|---|
| Protects Home from Foreclosure | Temporarily via automatic stay during the case | Yes, allows repayment of missed payments to stop foreclosure |
| Keep Home if Behind on Payments | Difficult unless you catch up quickly before discharge | Yes, through a 3–5 year court-approved repayment plan |
| Length of Process | Typically 3–5 months | 3–5 years, depending on income and repayment plan |
| Discharge Unsecured Debts | Yes, most unsecured debts are wiped out without repayment | Yes, remaining unsecured debts are discharged after plan completion |
| Maintain Homeownership | Possible if current on mortgage and equity is within exemptions | Designed to help homeowners retain property while catching up on arrears |
| Ideal For | Those with low income and who are current on mortgage payments but overwhelmed with unsecured debt | Homeowners behind on payments who need time to catch up while avoiding foreclosure |
How Michigan’s Homestead Exemption Protects Your Home
Michigan allows homeowners to exempt up to $46,125 ($69,200 if over 65 or disabled) in equity on their primary residence. This exemption protects your home during bankruptcy, allowing you to maintain ownership if you continue to pay your mortgage. Married couples filing jointly in Michigan cannot double the homestead exemption limit.
The federal homestead exemption caps at $27,900, while Michigan’s state exemption is significantly higher at $46,125. This higher exemption means many homeowners can file bankruptcy and keep their house. Understanding the difference between these exemptions is crucial when deciding which to apply during bankruptcy.
Compare State vs. Federal Homestead Exemptions
To better understand how these exemptions compare and which might be more advantageous in your situation, here is a side-by-side comparison of the Michigan state homestead exemption and the federal homestead exemption:
| Feature | Michigan State Exemption | Federal Exemption |
|---|---|---|
| Homestead Exemption Amount | $46,125 (or $69,200 if 65+ or disabled) | $27,900 (adjusted periodically for inflation) |
| What It Covers | Equity in your primary residence (house, condo, or mobile home on owned land) | Equity in your primary residence |
| Doubling for Married Couples | Not allowed under Michigan law | Allowed if property is jointly owned, effectively doubling the exemption |
| Impact on Bankruptcy | Protects more equity in higher-value homes, beneficial for residents with significant home equity | Lower protection, but may be paired with a wildcard exemption for flexibility |
| Wildcard Exemption Availability | Not available for additional home protection | Available, can add up to ~$13,900 in additional protection for home or other property |
| Best For | Homeowners with significant equity and no need for wildcard flexibility | Those with lower home equity or who need flexibility to protect other assets |
Will You Lose Your House If You File Chapter 7 in Michigan?
In Chapter 7 bankruptcy, your mortgage remains a secured debt. If your equity falls within the exemption and you stay current on payments, you’ll likely keep your home. If you’re asking “Will I lose my house if I file Chapter 7?” — the answer is generally no if you’re current and your equity is protected. However, if your home has too much equity that exceeds the exemption, Chapter 7 bankruptcy can lead to selling non-exempt assets, including your home. If you’re behind on payments, the lender may request the court lift the automatic stay to proceed with foreclosure.
Learn more about how the automatic stay protects you.
Reaffirmation Agreements in Michigan Bankruptcy
A reaffirmation agreement lets you continue your mortgage under original terms despite a bankruptcy discharge. It is often used to protect your credit score and reassure lenders of your commitment to ongoing payments. However, reaffirming debt means you remain personally liable, so it is important to consult an attorney to confirm whether reaffirmation aligns with your goals.
Long-Term Financial Considerations After Bankruptcy
Bankruptcy provides a fresh start, but rebuilding credit is vital. Continuing timely mortgage payments and managing spending will strengthen your finances. Michigan property held by spouses as tenancy by the entirety may be fully exempt from creditors if only one spouse files.
Using Bankruptcy Strategically to Protect Your Home and Finances
To protect your home during bankruptcy, take these key steps to understand your financial situation, meet legal requirements, and maximize Michigan’s protections:
- Evaluate your current mortgage status.
- Calculate your equity against the Michigan homestead exemption.
- Determine whether Chapter 7 or Chapter 13 aligns with your needs.
- Complete required credit counseling before filing.
- Seek professional guidance to file accurately and leverage the automatic stay.
- Prepare for credit counseling, which is mandatory before filing.
- Stay consistent with mortgage payments if you intend to keep your home.
Long-Term Financial Considerations After Bankruptcy
Bankruptcy provides a fresh financial start, but it is essential to plan for rebuilding your credit and budget. Continuing timely mortgage payments and managing expenses post-bankruptcy will strengthen your financial position, helping you retain your home long-term while avoiding future debt issues. If only one spouse files for bankruptcy, the property held as tenancy by the entirety may be entirely exempt from creditors.
Next Steps to Protect Your Home
If you are considering bankruptcy and want to protect your home in Michigan, taking action now can make a significant difference. Speaking with an experienced Michigan bankruptcy attorney will help you evaluate whether Chapter 7 or Chapter 13 is best for your situation, understand the impact of exemptions, and protect your home from foreclosure.
At Kostopoulos Bankruptcy Law, we have decades of experience helping Michigan homeowners protect their property while finding a clear path toward financial freedom.
Call 877-969-7482 today for a free consultation to protect your home while resolving your debt.