How to Stop Wage Garnishment Through 2026 Bankruptcy

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

That analysis typically determines whether Chapter 7 is safe for someone with built-up equity in Michigan property or a paid-off car. In Chapter 13, exemptions still matter, but in a different method. Rather of selling non-exempt property, the law usually requires that unsecured financial institutions get a minimum of as much through your plan as they would have received if you submitted Chapter 7 and your non-exempt properties were offered.

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For instance, a Michigan property owner with equity above the homestead exemption might pick Chapter 13, make a greater regular monthly payment for a set variety of years, and still keep the house. Because the option in between Michigan and federal exemptions can tilt the balance in between Chapter 7 and 13, this is not something to rate.

If Chapter 7 looks risky but the client's earnings can support a practical Chapter 13 payment, the suggestion may move toward Chapter 13 to protect hard-earned residential or commercial property. How each chapter treats your particular financial obligations often matters more than any abstract pros and cons list. Unsecured debts, such as credit cards, medical costs, payday advance loan, and lots of personal loans, typically get comparable end results in both chapters, but through various courses.

In Chapter 13, unsecured creditors often get a share of what you pay into the plan, which may be anywhere from a small percentage to the full quantity, and the remaining balance can be released at the end if you complete your plan. Safe debts include property that acts as security, such as a home mortgage on a home or a lien on a vehicle.

Potential Legal Results of 2026 Bankruptcy

Keeping a secured asset typically includes remaining current on payments and, sometimes, signing a reaffirmation contract that keeps you personally accountable on that particular loan after bankruptcy. If you are far behind and can not capture up quickly, giving up the property in Chapter 7 wipes out your individual liability for any deficiency balance after the loan provider offers it.

You can expand mortgage or vehicle loan defaults over a three to five-year strategy, which is called curing defaults, while also resuming your regular monthly payments. In some scenarios, Chapter 13 likewise permits a decrease of particular car loan balances to the cars and truck's existing worth, a principle called cramdown, though comprehensive rules use.

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Top priority and nondischargeable financial obligations, such as current earnings taxes, kid assistance, alimony, and a lot of student loans, stand in a different category. These are generally not eliminated 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 in full through your plan before unsecured creditors get anything.

At Hensel Law Workplace, PLLC, a detailed creditor list is mapped to these categories so you see precisely which debts will be eliminated, which need to be paid, and which chapter manages them better. Knowing for how long each chapter lasts and what life appears like during the case can make the choice feel less abstract.

Shortly after filing, the automatic stay typically stops garnishments, lawsuits, and many collection calls. You attend a conference of creditors, frequently called the 341 conference, where the trustee asks concerns about your documents and finances. After that, you mainly await due dates to pass and for the court to issue a discharge, unless the trustee requires more info or is exploring non-exempt possessions.

Understanding Bankruptcy Fees in 2026

You file the case, and the automated stay goes into result, stopping garnishments, foreclosure sales, and many collection activity. You propose a repayment plan, start making month-to-month payments to the Chapter 13 trustee, and participate in a 341 conference and, in most cases, a verification hearing where the judge thinks about whether to authorize the strategy.

Numerous Michigan filers are surprised by how structured but manageable the everyday truth can be when the plan is sensible. In Chapter 7, your main duties are to be truthful, provide files, attend your meeting, and complete a needed financial education course. In Chapter 13, the added obligations include adhering to a budget plan, making every strategy payment on time, and reporting considerable income changes.

Once 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 moves much faster and typically involves no long-term payment commitments, which appeals to Michigan renters and homeowners who are current on their mortgages and have primarily unsecured debts.