Times are tough in Michigan and the sole source of income for some people are unemployment benefits. However, unemployment benefits can only be stretched so far. Often times they are insufficient to cover the basic living expenses and with mounting bills such as credit cards, mortgage payments, and other financial responsibilities, bankruptcy becomes a reality. In Michigan, unemployment benefits are protected from being included in the bankruptcy estate. When a person who is receiving unemployment benefits files for bankruptcy those benefits are not included in the bankruptcy estate that is created when you file a bankruptcy petition. Therefore, the bankruptcy trustee, the person who oversees the bankruptcy estate, can not use money received as unemployment benefits to pay any of your creditors. The benefits must still be included as income on paperwork filed with the bankruptcy petition, however, that same amount is also identified as exempted. It is important to disclose unemployment benefits even though they will be shielded from creditors.