Deciding Between 13 and 7 for 2026

In Chapter 7, the trustee looks at your properties and compares their equity to the exemptions you declare. Equity is the value 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 normally leaves that asset alone.

That analysis often determines whether Chapter 7 is safe for someone with built-up equity in Michigan realty or a paid-off lorry. In Chapter 13, exemptions still matter, but in a various method. Instead of selling non-exempt home, the law generally requires that unsecured lenders get a minimum of as much through your plan as they would have gotten if you submitted Chapter 7 and your non-exempt assets were sold.

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A Michigan house owner with equity above the homestead exemption may select Chapter 13, make a higher month-to-month payment for a set number of years, and still keep the house. Because the choice between Michigan and federal exemptions can tilt the balance between Chapter 7 and 13, this is not something to rate.

If Chapter 7 looks dangerous but the client's income can support a realistic Chapter 13 payment, the recommendation might shift towards Chapter 13 to protect hard-earned home. How each chapter treats your specific debts typically matters more than any abstract pros and cons list. Unsecured financial obligations, such as credit cards, medical expenses, payday advance loan, and lots of personal loans, typically receive similar outcome in both chapters, however through different paths.

In Chapter 13, unsecured lenders frequently receive a share of what you pay into the strategy, which may be anywhere from a small portion to the complete amount, and the staying balance can be released at the end if you complete your strategy. Protected financial obligations include home that functions as security, such as a mortgage on a home or a lien on a car.

How to File for Chapter 7 in 2026

Keeping a protected possession often involves staying existing on payments and, in many cases, signing a reaffirmation arrangement that keeps you personally accountable 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 eliminates your personal liability for any deficiency balance after the lending institution sells it.

You can spread out mortgage or vehicle loan financial obligations over a 3 to five-year plan, which is called curing arrears, while also resuming your routine monthly payments. In some scenarios, Chapter 13 likewise allows a decrease of specific lorry loan balances to the vehicle's present value, a concept referred to as cramdown, though comprehensive guidelines use.

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Concern and nondischargeable financial obligations, such as recent income taxes, kid assistance, spousal support, and many student loans, stand in a separate classification. These are generally not eliminated in Chapter 7, though the automatic stay can pause some collection while the case is pending. In Chapter 13, these financial obligations are frequently paid in full through your strategy before unsecured lenders get anything.

At Hensel Law Office, PLLC, a detailed financial institution list is mapped to these classifications so you see exactly which financial obligations will be eliminated, which need to be paid, and which chapter manages them better. Knowing how long each chapter lasts and what daily life looks like throughout the case can decide feel less abstract.

Shortly after filing, the automated stay usually stops garnishments, claims, and many collection calls. You go to a conference of creditors, often called the 341 conference, where the trustee asks concerns about your documentation and financial resources. After that, you generally wait on due dates to pass and for the court to release a discharge, unless the trustee needs more info or is checking out non-exempt properties.

Strategic 2026 Bankruptcy Support and Tips

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

Numerous Michigan filers are amazed by how structured but workable the daily truth can be when the strategy is practical. In Chapter 7, your main obligations are to be truthful, supply files, attend your meeting, and complete a needed monetary education course. In Chapter 13, the included duties consist of staying with a spending plan, making every plan payment on time, and reporting substantial earnings changes.

When you understand 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 typically includes no long-term payment obligations, which appeals to Michigan renters and homeowners who are present on their home mortgages and have mostly unsecured financial obligations.