Guide to 2026 Chapter 13 Filing

In Chapter 7, the trustee takes a look at your assets 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, car, or other home is fully covered by exemptions, the trustee normally leaves that possession alone.

That analysis typically identifies whether Chapter 7 is safe for someone with built-up equity in Michigan genuine estate or a paid-off automobile. In Chapter 13, exemptions still matter, however in a various way. Instead of selling non-exempt residential or commercial property, the law usually needs that unsecured financial institutions receive a minimum of as much through your strategy as they would have gotten if you filed Chapter 7 and your non-exempt properties were offered.

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A Michigan property owner with equity above the homestead exemption might choose Chapter 13, make a greater regular monthly payment for a set number of years, and still keep the house. 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 but the customer's income can support a practical Chapter 13 payment, the suggestion might shift toward Chapter 13 to safeguard hard-earned property. How each chapter treats your particular debts often matters more than any abstract pros and cons list. Unsecured debts, such as credit cards, medical bills, payday advance loan, and numerous individual loans, typically receive similar end results in both chapters, but through various courses.

In Chapter 13, unsecured financial institutions often receive a share of what you pay into the plan, which might be anywhere from a small percentage to the full amount, and the remaining balance can be discharged at the end if you finish your plan. Safe debts involve property that serves as collateral, such as a mortgage on a home or a lien on a car.

New Filing Steps for 2026 Bankruptcy

Keeping a protected asset often involves remaining current on payments and, in some cases, signing a reaffirmation agreement that keeps you personally responsible on that particular loan after insolvency. If you are far behind and can not capture up quickly, surrendering the residential or commercial property in Chapter 7 eliminates your personal liability for any shortage balance after the loan provider offers it.

You can spread out home loan or cars and truck loan defaults over a 3 to five-year plan, which is called treating defaults, while also resuming your routine monthly payments. In some situations, Chapter 13 likewise allows a reduction of specific automobile loan balances to the automobile's existing worth, an idea referred to as cramdown, though detailed guidelines apply.

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Top priority and nondischargeable debts, such as recent income taxes, kid assistance, alimony, and a lot of trainee loans, stand in a different category. These are normally not wiped out in Chapter 7, though the automatic stay can pause some collection while the case is pending. In Chapter 13, these debts are frequently paid completely through your plan before unsecured financial institutions get anything.

At Hensel Law Workplace, PLLC, an in-depth lender list is mapped to these classifications so you see precisely which debts will be eliminated, which should be paid, and which chapter manages them better. Understanding how long each chapter lasts and what daily life looks like throughout the case can make the choice feel less abstract.

Shortly after filing, the automatic stay typically stops garnishments, suits, and many collection calls. You go to a conference of creditors, typically called the 341 meeting, where the trustee asks concerns about your documents and finances. After that, you primarily wait for deadlines to pass and for the court to release a discharge, unless the trustee needs more info or is checking out non-exempt properties.

Picking Chapter 7 for Your 2026 Needs

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

Many Michigan filers are surprised by how structured but workable the everyday truth can be when the strategy is sensible. In Chapter 7, your primary responsibilities are to be honest, offer documents, attend your conference, and finish a required monetary education course. In Chapter 13, the included obligations consist of sticking to a spending plan, making every strategy payment on time, and reporting considerable earnings changes.

When 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 relocations much faster and typically includes no long-term payment obligations, which appeals to Michigan tenants and homeowners who are existing on their mortgages and have mostly unsecured debts.