Legal Support for 2026 Chapter 13 Filers

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

That analysis typically determines whether Chapter 7 is safe for somebody with built-up equity in Michigan realty or a paid-off car. In Chapter 13, exemptions still matter, but in a various way. Instead of selling non-exempt residential or commercial property, the law normally requires that unsecured financial institutions get at least 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 pick Chapter 13, make a greater regular monthly payment for a set number of years, and still keep the home. Since the option 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 however the customer's earnings can support a sensible Chapter 13 payment, the suggestion might move toward Chapter 13 to secure hard-earned property. How each chapter treats your particular financial obligations often matters more than any abstract benefits and drawbacks list. Unsecured debts, such as credit cards, medical expenses, payday loans, and numerous individual loans, generally receive similar end results in both chapters, but through different courses.

In Chapter 13, unsecured financial institutions typically receive a share of what you pay into the plan, which may be anywhere from a little portion to the complete amount, and the staying balance can be discharged at the end if you finish your strategy. Safe financial obligations include property that works as security, such as a home mortgage on a home or a lien on an automobile.

Should You Use Chapter 7 in 2026?

Keeping a protected property typically involves staying present on payments and, sometimes, signing a reaffirmation agreement that keeps you personally liable on that specific loan after insolvency. If you are far behind and can not catch up rapidly, surrendering the residential or commercial property in Chapter 7 erases your individual liability for any shortage balance after the loan provider offers it.

You can expand home mortgage or auto loan financial obligations over a 3 to five-year strategy, which is called treating arrears, while also resuming your routine monthly payments. In some scenarios, Chapter 13 also enables a decrease of specific automobile loan balances to the cars and truck's present worth, an idea called cramdown, though in-depth guidelines apply.

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Concern and nondischargeable financial obligations, such as current earnings taxes, kid assistance, alimony, and most student loans, stand in a separate classification. These are generally 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 in complete through your plan before unsecured financial institutions get anything.

At Hensel Law Office, PLLC, an in-depth creditor list is mapped to these categories 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 decide feel less abstract.

Quickly after filing, the automatic stay normally stops garnishments, claims, and the majority of collection calls. You go to a meeting of creditors, often called the 341 conference, where the trustee asks concerns about your documentation and financial resources. After that, you primarily wait for deadlines to pass and for the court to release a discharge, unless the trustee requires more details or is exploring non-exempt properties.

Understanding Attorney Costs in 2026

You submit the case, and the automatic stay goes into result, stopping garnishments, foreclosure sales, and the majority of collection activity. You propose a payment plan, start making month-to-month payments to the Chapter 13 trustee, and attend a 341 conference and, in most cases, a verification hearing where the judge considers whether to authorize the plan.

Many Michigan filers are shocked by how structured however workable the daily truth can be when the strategy is practical. In Chapter 7, your main responsibilities are to be sincere, provide documents, attend your meeting, and complete a needed monetary education course. In Chapter 13, the included duties include adhering to a budget plan, making every strategy payment on time, and reporting substantial earnings modifications.

As soon as 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 faster and typically includes no long-lasting payment commitments, which interest Michigan tenants and homeowners who are current on their home mortgages and have mainly unsecured debts.