Section 722

• Section 722 of the federal bankruptcy code gives all persons who file Chapter 7 the right to redeem certain personal property on the day that they file the bankruptcy petition. To redeem your property in Michigan, you must pay the creditor the property's current value on the day you file your petition. For example, if your home is worth $45,000, you may redeem it for that amount upon filing for bankruptcy even if you owe $90,000 in mortgage payments.
  
  

Statutory Right of Redemption

• At the time of publication, Michigan offers a statutory right of redemption to any homeowner facing foreclosure. After the mortgage lender forecloses on the property, the homeowner has the right to redeem it by paying the entire loan balance, including late fees, penalties and other costs. This right of redemption is more expensive than the bankruptcy right of redemption, as you must pay the entire balance rather than the current value of the property.
  
  

Automatic Stay

• If a homeowner files for bankruptcy during the foreclosure process, the Michigan court issues an automatic stay, which stops the mortgage holder from proceeding with foreclosure or other collection activities. However, the mortgage holder may ask for relief from the bankruptcy court, which will allow it to continue foreclosure proceedings. Thus, it may be to your advantage to claim your right to redemption if you can afford to do so.
  
  

What to Do

• If you are facing foreclosure and are considering bankruptcy in Michigan, contact an attorney knowledgeable in bankruptcy issues. Your attorney can help you decide whether filing for bankruptcy and claiming the right of redemption is your best option. If you choose to claim your right of redemption, your attorney can file the appropriate paperwork for you as well as guide you through the process. If you cannot afford an attorney, contact Legal Aid -- state-run free legal services -- to see if you can get one for free or low cost.