Unemployment benefits are many people’s only source of income in truly difficult times. However, they are often insufficient for providing the standard of living recipients had before becoming unemployed, and they are, therefore, also often insufficient for keeping people from losing further financial ground and arriving at the possibility of needing to file for bankruptcy simply to keep food on the table.
Fortunately, in Michigan, unemployment benefits are protected when recipients file for bankruptcy. Michigan law provides that unemployment benefits are not included in the “bankruptcy estate” that is created when you file a bankruptcy petition and that the bankruptcy trustee, who oversees that estate, may not, therefore, transfer that money to any of your creditors. Unemployment benefits must, however, be listed as part of your current income in Schedule I, which is one of the several “schedules” attached to each bankruptcy petition. This same amount is then also listed as “exempted” on another of the attached schedules, but it is important to disclose your unemployment benefits as income to your bankruptcy attorney.
Prior to filing for bankruptcy, creditors may endanger your unemployment benefits indirectly by threatening to sue you for money owed to them, and a successful suit would allow them to place a judgment lien on your personal property or even garnish your bank accounts—which might contain unemployment benefit funds.
If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.
