Will Filing Bankruptcy Stop Foreclosure?
Full Question:
Answer:
Homestead exemption laws in MI protect up to $3,500 of value in a homestead. this exemption does not apply to any mortgage on the homestead, lawfully obtained, except that the mortgage is not valid without the signature of a married judgment debtor's spouse unless either of the following occurs:
(i) The mortgage is given to secure the payment of the purchase
money or a portion of the purchase money.
(ii) The mortgage is recorded in the office of the register of deeds of
the county in which the property is located, for a period of 25 years,
and no notice of a claim of invalidity is filed in that office during the
25 years following the recording of the mortgage.
600.6023a Property held jointly by husband and wife; exemption under
judgment entered against 1 spouse.
Sec. 6023a.
Property described in section 1 of 1927 PA 212, MCL 557.151, or real
property, held jointly by a husband and wife as a tenancy by the entirety
is exempt from execution under a judgment entered against only 1 spouse.
600.6027 Homestead valued at more than $3,500; procedure.
Sec. 6027. If the homestead of any debtor is appraised at a value of
more than $3,500.00, and cannot be divided, the debtor shall not for that
reason lose the benefit of the exemption; but in such cases the officer
shall deliver a notice, attached to a copy of the appraisal, to the
debtor or to some of his family of suitable age to understand the nature
thereof, that unless the debtor pay the officer the surplus over and
above the $3,500.00, or the amount due on the execution within 60 days
thereafter, the premises will be sold.
Homestead exemption laws protect property from the claims of creditors. Even though the loan is in your husband's name, if the loan was in default and the creditor sought to foreclose on the property, you might be able to claim that some of the property is exempt from creditors' claims under the homestead exemption. The homestead waiver protects creditors from not being able to collect money due because of a homestead exemption, but does not necessarily waive inheritance rights or community property/marital property rights, unless those rights are also waived in the waiver. A homestead waiver, by itself, only pertains to creditors' claims and not inheritance or marital property rights.
There are two basic types of Bankruptcy proceedings. A filing under Chapter 7 is called liquidation. It is the most common type of bankruptcy proceeding. Liquidation involves the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the proceeds to the creditors. Not dischargeable in bankruptcy are alimony and child support, taxes, and fraudulent transactions. To qualify for relief under Chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. Filing a bankruptcy petition automatically suspends all existing legal actions and is often used to forestall foreclosure or imposition of judgment. After 45 or more days a creditor with a debt secured by real or personal property can petition the court to have the "automatic stay" of legal rights removed and a foreclosure to proceed. When the court formally declares a party as a bankrupt, a party cannot file for bankruptcy again for seven years.
Chapter 11 bankruptcy allows a business to reorganize and refinance to be able to prevent final insolvency. Often there is no trustee, but a "debtor in possession," and considerable time to present a plan of reorganization. The final plan often requires creditors to take only a small percentage of the debts owed them or to take payment over a long period of time. Chapter 13 is similar to Chapter 11, but is for individuals to work out payment schedules.
Please see the following MI statutes:
600.6023 Property, insurance, homesteads, IRA accounts, pension rights;
exemptions
Sec. 6023. (1) The following property of the debtor and the debtor's
dependents shall be exempt from levy and sale under any execution:
(a) All family pictures, all arms and accouterments required by law to
be kept by any person, all wearing apparel of every person or family, and
provisions and fuel for comfortable subsistence of each householder and
his or her family for 6 months.
(b) All household goods, furniture, utensils, books, and appliances,
not exceeding in value $1,000.00.
(c) A seat, pew, or slip occupied by the judgment debtor or the
judgment debtor's family in any house or place of public worship, and all
cemeteries, tombs, and rights of burial while in use as repositories of
the dead of the judgment debtor's family or kept for burial of the
judgment debtor.
(d) To each householder, 10 sheep, 2 cows, 5 swine, 100 hens, 5
roosters, and a sufficient quantity of hay and grain, growing or
otherwise, for properly keeping the animals and poultry for 6 months.
(e) The tools, implements, materials, stock, apparatus, team, vehicle,
motor vehicle, horses, harness, or other things to enable a person to
carry on the profession, trade, occupation, or business in which the
person is principally engaged, not exceeding in value $1,000.00.
(f) Any money or other benefits paid, provided, or allowed to be paid,
provided, or allowed, by any stock or mutual life or health or casualty
insurance company, on account of the disability due to injury or sickness
of any insured person, whether the debt or liability of such insured
person or beneficiary was incurred before or after the accrual of benefits
under the insurance policy or contract, except that the exemption does
not apply to actions to recover for necessities contracted for after the
accrual of the benefits.
(g) The shares held by any member, being a householder, of any
association incorporated under the provisions of the savings and loan act
of 1980, 1980 PA 307, M.C.L. 491.102 to 491.1202, to the amount of
$1,000.00 in such shares, at par value, except that this exemption does
not apply to any person who has a homestead exempted under the general
laws of this state.
(h) A homestead of not exceeding 40 acres of land and the dwelling
house and appurtenances on that homestead, and not included in any
recorded plat, city, or village, or, instead, and at the option of the
owner, a quantity of land not exceeding in amount 1 lot, being within a
recorded town plat, city, or village, and the dwelling house and
appurtenances on that land, owned and occupied by any resident of this
state, not exceeding in value $3,500.00. This exemption extends to any
person owning and occupying any house on land not his or her own and which
the person claims as a homestead. However, this exemption does not apply
to any mortgage on the homestead, lawfully obtained, except that the
mortgage is not valid without the signature of a married judgment
debtor's spouse unless either of the following occurs:
(i) The mortgage is given to secure the payment of the purchase
money or a portion of the purchase money.
(ii) The mortgage is recorded in the office of the register of deeds of
the county in which the property is located, for a period of 25 years,
and no notice of a claim of invalidity is filed in that office during the
25 years following the recording of the mortgage.
(i) An equity of redemption as described in section 6060.
(j) The homestead of a family, after the death of the owner of the
homestead, from the payment of his or her debts in all cases during the
minority of his or her children.
(k) An individual retirement account or individual retirement annuity
as defined in section 408 or 408a of the internal revenue code of 1986
and the payments or distributions from such an account or annuity. This
exemption applies to the operation of the federal bankruptcy code as
permitted by section 522(b)(2) of title 11 of the United States Code,
11 U.S.C. § 522. This exemption does not apply to any amounts
contributed to an individual retirement account or individual retirement
annuity if the contribution occurs within 120 days before the debtor
files for bankruptcy. This exemption does not apply to an individual
retirement account or individual retirement annuity to the extent that
any of the following occur:
(i) The individual retirement account or individual retirement
annuity is subject to an order of a court pursuant to a judgment
of divorce or separate maintenance.
(ii) The individual retirement account or individual retirement annuity
is subject to an order of a court concerning child support.
(iii) Contributions to the individual retirement account or premiums on
the individual retirement annuity, including the earnings or benefits
from those contributions or premiums, exceed, in the tax year made or
paid, the deductible amount allowed under section 408 of the internal
revenue code of 1986. This limitation on contributions does not apply to
a rollover of a pension, profit-sharing, stock bonus plan or other plan
that is qualified under section 401 of the internal revenue code of
1986, or an annuity contract under section 403(b) of the internal
revenue code of 1986.
(l) The right or interest of a person in a pension, profit-sharing,
stock bonus, or other plan that is qualified under section 401 of the
internal revenue code of 1986, or an annuity contract under section 403(b)
of the internal revenue code of 1986, which plan or annuity is subject to
the employee retirement income security act of 1974, Public Law 93-406,
88 Stat. 829. This exemption applies to the operation of the federal
bankruptcy code, as permitted by section 522(b)(2) of title 11 of the
United States Code, 11 U.S.C. § 522. This exemption does not apply to
any amount contributed to a pension, profit-sharing, stock bonus, or
other qualified plan or a 403(b) annuity if the contribution occurs
within 120 days before the debtor files for bankruptcy. This exemption
does not apply to the right or interest of a person in a pension,
profit-sharing, stock bonus, or other qualified plan or a 403(b) annuity
to the extent that the right or interest in the plan or annuity is
subject to any of the following:
(i) An order of a court pursuant to a judgment of divorce or separate
maintenance.
(ii) An order of a court concerning child support.
(2) The exemptions provided in this section shall not extend to
any lien thereon excluded from exemption by law.
(3) If the owner of a homestead dies, leaving a surviving spouse but no
children, the homestead shall be exempt, and the rents and profits of the
homestead shall accrue to the benefit of the surviving spouse before his
or her remarriage, unless the surviving spouse is the owner of a
homestead in his or her own right.
