Key 2026 Bankruptcy Support and Tips

In Chapter 7, the trustee looks at your properties and compares their equity to the exemptions you declare. Equity is the value of the property minus what you owe on it. If your equity in a home, automobile, or other residential or commercial property is completely covered by exemptions, the trustee typically leaves that asset alone.

That analysis typically determines 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. Rather of selling non-exempt home, the law typically requires 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 assets were sold.

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For instance, a Michigan house owner with equity above the homestead exemption may choose Chapter 13, make a greater month-to-month payment for a set number of years, and still keep the home. Since the option between Michigan and federal exemptions can tilt the balance between Chapter 7 and 13, this is not something to guess at.

If Chapter 7 looks risky however the customer's earnings can support a sensible Chapter 13 payment, the recommendation may shift towards Chapter 13 to secure hard-earned residential or commercial property. How each chapter treats your specific debts often matters more than any abstract benefits and drawbacks list. Unsecured financial obligations, such as charge card, medical expenses, payday advance, and lots of personal loans, typically receive comparable outcome in both chapters, but through different courses.

In Chapter 13, unsecured financial institutions frequently get a share of what you pay into the plan, which may be anywhere from a small portion to the full amount, and the staying balance can be discharged at the end if you finish your plan. Protected financial obligations include residential or commercial property that functions as collateral, such as a mortgage on a home or a lien on an automobile.

Comparing Chapter 13 Vs Chapter 13 in 2026

Keeping a secured property often involves staying present on payments and, in some cases, signing a reaffirmation contract that keeps you personally liable on that specific loan after personal bankruptcy. If you are far behind and can not capture up quickly, surrendering the residential or commercial property in Chapter 7 cleans out your personal liability for any shortage balance after the lender offers it.

You can expand home mortgage or cars and truck loan financial obligations over a three to five-year plan, which is called curing arrears, while also resuming your regular month-to-month payments. In some scenarios, Chapter 13 likewise enables a reduction of particular vehicle loan balances to the automobile's existing worth, an idea referred to as cramdown, though in-depth rules use.

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Priority and nondischargeable debts, such as current income taxes, kid support, spousal support, and a lot of trainee loans, stand in a separate classification. These are generally not eliminated in Chapter 7, though the automated stay can stop briefly some collection while the case is pending. In Chapter 13, these financial obligations are often paid completely through your strategy before unsecured lenders get anything.

At Hensel Law Workplace, PLLC, a detailed financial institution list is mapped to these classifications so you see exactly which financial obligations will be erased, which need to be paid, and which chapter handles them better. Understanding how long each chapter lasts and what every day life appears like throughout the case can make the choice feel less abstract.

Soon after filing, the automatic stay generally stops garnishments, claims, and many collection calls. You attend a conference of lenders, frequently called the 341 conference, where the trustee asks questions about your documents and financial resources. After that, you primarily wait on deadlines to pass and for the court to release a discharge, unless the trustee requires more details or is exploring non-exempt properties.

Protecting Income From 2026 Garnishment

You file the case, and the automated stay enters into result, stopping garnishments, foreclosure sales, and many collection activity. You propose a repayment strategy, begin making month-to-month payments to the Chapter 13 trustee, and attend a 341 meeting and, in lots of cases, a confirmation hearing where the judge thinks about whether to authorize the plan.

Numerous Michigan filers are amazed by how structured but manageable the day-to-day truth can be when the plan is realistic. In Chapter 7, your primary obligations are to be sincere, supply files, attend your meeting, and complete a needed monetary education course. In Chapter 13, the included obligations consist of adhering to a budget plan, making every plan payment on time, and reporting substantial earnings changes.

When you understand how each chapter works, the next action is lining that up with your objectives. One core tradeoff is speed versus structure. Chapter 7 moves quicker and normally involves no long-lasting payment responsibilities, which appeals to Michigan renters and property owners who are present on their home mortgages and have primarily unsecured debts.