Financial Support for 2026 Bankruptcy Filers

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

That analysis typically identifies whether Chapter 7 is safe for somebody with built-up equity in Michigan property or a paid-off lorry. In Chapter 13, exemptions still matter, but in a different method. Rather of selling non-exempt residential or commercial property, the law normally requires that unsecured lenders receive at least as much through your strategy as they would have received if you submitted Chapter 7 and your non-exempt assets were sold.

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A Michigan property owner with equity above the homestead exemption may pick Chapter 13, make a greater month-to-month payment for a set number of years, and still keep the house. Because the option 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 risky however the client's earnings can support a realistic Chapter 13 payment, the suggestion might move toward Chapter 13 to secure hard-earned property. How each chapter treats your specific financial obligations typically matters more than any abstract benefits and drawbacks list. Unsecured financial obligations, such as charge card, medical bills, payday advance loan, and lots of individual loans, generally get comparable end results in both chapters, however through various courses.

In Chapter 13, unsecured lenders typically receive a share of what you pay into the plan, which may be anywhere from a small percentage to the complete quantity, and the remaining balance can be released at the end if you finish your plan. Guaranteed financial obligations include home that works as collateral, such as a mortgage on a home or a lien on an automobile.

Saving Wages From 2026 Garnishment

Keeping a secured asset typically includes staying present on payments and, in many cases, signing a reaffirmation arrangement that keeps you personally accountable on that specific loan after personal bankruptcy. If you are far behind and can not catch up quickly, surrendering the property in Chapter 7 erases your personal liability for any deficiency balance after the loan provider offers it.

You can expand mortgage or cars and truck loan defaults over a 3 to five-year plan, which is called curing arrears, while likewise resuming your regular month-to-month payments. In some scenarios, Chapter 13 likewise enables a decrease of certain lorry loan balances to the car's existing worth, a principle referred to as cramdown, though comprehensive rules apply.

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Top priority and nondischargeable debts, such as current income taxes, kid assistance, alimony, and a lot of student loans, stand in a different category. These are usually not erased in Chapter 7, though the automatic stay can pause some collection while the case is pending. In Chapter 13, these debts are frequently paid in complete through your plan before unsecured creditors get anything.

At Hensel Law Office, PLLC, a detailed financial institution list is mapped to these classifications so you see exactly which debts will be removed, which should be paid, and which chapter handles them better. Understanding how long each chapter lasts and what life appears like during the case can decide feel less abstract.

Shortly after filing, the automated stay generally stops garnishments, suits, and the majority of collection calls. You attend a meeting of creditors, typically called the 341 conference, where the trustee asks concerns about your paperwork and finances. After that, you mainly wait on due dates to pass and for the court to provide a discharge, unless the trustee needs more info or is checking out non-exempt properties.

Should You Use Chapter 13 in 2026

You submit the case, and the automated stay goes into result, stopping garnishments, foreclosure sales, and a lot of collection activity. You propose a payment strategy, start making month-to-month payments to the Chapter 13 trustee, and go to a 341 meeting and, oftentimes, a verification hearing where the judge considers whether to approve the plan.

Lots of Michigan filers are surprised by how structured but workable the day-to-day truth can be when the plan is realistic. In Chapter 7, your primary obligations are to be honest, provide documents, attend your meeting, and finish a needed monetary education course. In Chapter 13, the included obligations consist of sticking to a budget plan, making every plan payment on time, and reporting substantial income modifications.

When you understand how each chapter works, the next step is lining that up with your objectives. One core tradeoff is speed versus structure. Chapter 7 relocations quicker and usually involves no long-term payment obligations, which attract Michigan renters and property owners who are current on their mortgages and have mostly unsecured financial obligations.