Key 2026 Bankruptcy Support and Strategies

In Chapter 7, the trustee takes a look at your possessions and compares their equity to the exemptions you claim. Equity is the worth of the residential or commercial property minus what you owe on it. If your equity in a home, lorry, or other residential or commercial property is fully covered by exemptions, the trustee typically leaves that asset alone.

That analysis frequently identifies whether Chapter 7 is safe for somebody with built-up equity in Michigan property or a paid-off automobile. In Chapter 13, exemptions still matter, however in a different way. Instead of selling non-exempt home, the law typically needs that unsecured creditors receive at least as much through your strategy as they would have gotten if you filed Chapter 7 and your non-exempt possessions were sold.

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A Michigan property owner with equity above the homestead exemption may select Chapter 13, make a greater monthly payment for a set number of years, and still keep the home. Since the choice between Michigan and federal exemptions can tilt the balance in between Chapter 7 and 13, this is not something to guess at.

If Chapter 7 looks dangerous but the customer's earnings can support a sensible Chapter 13 payment, the suggestion may shift towards Chapter 13 to safeguard hard-earned residential or commercial property. How each chapter treats your specific debts often matters more than any abstract benefits and drawbacks list. Unsecured debts, such as charge card, medical costs, payday advance, and numerous personal loans, usually receive comparable outcome in both chapters, but through various courses.

In Chapter 13, unsecured financial institutions typically get a share of what you pay into the strategy, which may be anywhere from a small percentage to the full amount, and the staying balance can be discharged at the end if you complete your strategy. Safe debts involve home that serves as security, such as a home loan on a home or a lien on an automobile.

Deciding Between Chapter 7 and Chapter 13 for 2026

Keeping a protected property frequently includes staying existing on payments and, in some cases, signing a reaffirmation agreement that keeps you personally liable on that particular loan after insolvency. If you are far behind and can not catch up rapidly, surrendering the home in Chapter 7 cleans out your personal liability for any shortage balance after the lender offers it.

You can spread out home loan or car loan defaults over a 3 to five-year plan, which is called treating defaults, while also resuming your routine month-to-month payments. In some circumstances, Chapter 13 likewise enables a decrease of specific automobile loan balances to the automobile's present worth, an idea referred to as cramdown, though in-depth guidelines use.

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Priority and nondischargeable debts, such as current earnings taxes, child support, spousal support, and the majority of trainee loans, stand in a separate classification. These are typically not wiped out in Chapter 7, though the automatic stay can stop briefly some collection while the case is pending. In Chapter 13, these financial obligations are frequently paid completely through your plan before unsecured creditors get anything.

At Hensel Law Office, PLLC, an in-depth lender list is mapped to these categories so you see exactly which financial obligations will be erased, which need to be paid, and which chapter handles them more effectively. Understanding how long each chapter lasts and what daily life looks like throughout the case can decide feel less abstract.

Quickly after filing, the automatic stay generally stops garnishments, claims, and many collection calls. You go to a conference of lenders, typically called the 341 meeting, where the trustee asks concerns about your paperwork and financial resources. After that, you mainly wait for deadlines to pass and for the court to provide a discharge, unless the trustee needs more information or is exploring non-exempt assets.

Comparing Chapter 7 Vs Chapter 13 in 2026

You submit the case, and the automatic stay goes into effect, stopping garnishments, foreclosure sales, and a lot of collection activity. You propose a repayment plan, start making regular monthly payments to the Chapter 13 trustee, and go to a 341 conference and, in a lot of cases, a confirmation hearing where the judge thinks about whether to authorize the strategy.

Numerous Michigan filers are surprised by how structured however workable the daily reality can be when the plan is sensible. In Chapter 7, your primary obligations are to be truthful, offer documents, attend your conference, and finish a required financial education course. In Chapter 13, the added obligations consist of sticking to a budget, making every strategy payment on time, and reporting considerable earnings modifications.

Once you understand how each chapter works, the next step is lining that up with your goals. One core tradeoff is speed versus structure. Chapter 7 moves much faster and typically includes no long-term payment commitments, which appeals to Michigan tenants and house owners who are present on their mortgages and have primarily unsecured financial obligations.