Stop Wage Garnishment Through 2026 Bankruptcy

In Chapter 7, the trustee looks at your assets and compares their equity to the exemptions you claim. 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 residential or commercial property is fully covered by exemptions, the trustee usually leaves that asset alone.

That analysis frequently identifies whether Chapter 7 is safe for somebody with built-up equity in Michigan genuine estate or a paid-off car. In Chapter 13, exemptions still matter, however in a various way. Rather of selling non-exempt home, the law normally needs that unsecured creditors get at least as much through your plan as they would have received if you filed Chapter 7 and your non-exempt assets were sold.

apfsc.org

A Michigan homeowner 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 home. Because the option in between Michigan and federal exemptions can tilt the balance between Chapter 7 and 13, this is not something to think at.

If Chapter 7 looks risky but the customer's earnings can support a practical Chapter 13 payment, the suggestion might shift towards Chapter 13 to protect hard-earned home. How each chapter treats your particular debts frequently matters more than any abstract advantages and disadvantages list. Unsecured financial obligations, such as charge card, medical expenses, payday advance, and numerous individual loans, usually get similar end results in both chapters, but through various paths.

In Chapter 13, unsecured creditors often receive a share of what you pay into the plan, which may be anywhere from a little percentage to the full quantity, and the remaining balance can be released at the end if you finish your strategy. Protected financial obligations include residential or commercial property that acts as security, such as a home loan on a home or a lien on a car.

Picking Chapter 13 for Your 2026 Benefit

Keeping a protected asset often includes remaining current on payments and, sometimes, signing a reaffirmation agreement that keeps you personally accountable on that specific loan after insolvency. If you are far behind and can not capture up rapidly, giving up the home in Chapter 7 erases your personal liability for any shortage balance after the lender offers it.

You can spread out home mortgage or auto loan arrears over a 3 to five-year plan, which is called treating arrears, while also resuming your routine monthly payments. In some situations, Chapter 13 also permits a reduction of certain car loan balances to the car's present value, a principle referred to as cramdown, though detailed guidelines use.

apfsc.org

Priority and nondischargeable debts, such as recent earnings taxes, kid assistance, spousal support, and many student loans, stand in a separate classification. These are normally not wiped out in Chapter 7, though the automated stay can stop briefly some collection while the case is pending. In Chapter 13, these debts are often paid completely through your strategy before unsecured financial institutions get anything.

At Hensel Law Workplace, PLLC, a comprehensive creditor list is mapped to these categories so you see precisely which debts will be removed, which should be paid, and which chapter handles them better. Knowing the length of time each chapter lasts and what life looks like throughout the case can make the choice feel less abstract.

Soon after filing, the automatic stay usually stops garnishments, suits, and many collection calls. You attend a meeting of financial institutions, often called the 341 conference, where the trustee asks concerns about your paperwork and finances. After that, you generally wait for deadlines to pass and for the court to release a discharge, unless the trustee needs more information or is exploring non-exempt possessions.

Navigating Between Chapter 7 and Chapter 13 for 2026

You submit the case, and the automatic stay enters into effect, 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 participate in a 341 meeting and, in most cases, a confirmation hearing where the judge thinks about whether to authorize the plan.

Many Michigan filers are amazed by how structured but workable the everyday truth can be when the strategy is sensible. In Chapter 7, your primary obligations are to be truthful, supply documents, attend your meeting, and complete a required monetary education course. In Chapter 13, the added obligations consist of staying with a budget, making every strategy payment on time, and reporting considerable income changes.

As soon as you comprehend how each chapter works, the next action is lining that up with your goals. One core tradeoff is speed versus structure. Chapter 7 relocations faster and usually involves no long-lasting payment responsibilities, which interest Michigan renters and homeowners who are current on their home mortgages and have mostly unsecured financial obligations.