Important Filing Requirements for 2026 Bankruptcy

In Chapter 7, the trustee takes a look at your properties and compares their equity to the exemptions you claim. Equity is the value of the home minus what you owe on it. If your equity in a home, vehicle, or other home is completely covered by exemptions, the trustee typically leaves that asset alone.

That analysis typically figures out whether Chapter 7 is safe for somebody with built-up equity in Michigan property or a paid-off car. In Chapter 13, exemptions still matter, however in a various way. Instead of offering non-exempt property, the law normally needs that unsecured lenders get 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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For example, a Michigan homeowner with equity above the homestead exemption might choose Chapter 13, make a higher regular monthly payment for a set variety of years, and still keep your home. Because the choice in between Michigan and federal exemptions can tilt the balance in between Chapter 7 and 13, this is not something to guess at.

If Chapter 7 looks risky however the customer'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 specific debts often matters more than any abstract pros and cons list. Unsecured debts, such as charge card, medical bills, payday advance, and lots of personal loans, typically receive comparable outcome in both chapters, however through various paths.

In Chapter 13, unsecured lenders typically get a share of what you pay into the plan, which may be anywhere from a small portion to the full amount, and the staying balance can be released at the end if you complete your plan. Guaranteed debts include residential or commercial property that works as collateral, such as a home loan on a home or a lien on a car.

Potential Legal Impacts of 2026 Bankruptcy

Keeping a secured possession typically involves remaining present on payments and, in some cases, signing a reaffirmation arrangement that keeps you personally responsible on that specific loan after personal bankruptcy. If you are far behind and can not capture up rapidly, surrendering the property in Chapter 7 erases your individual liability for any deficiency balance after the lender sells it.

You can expand home mortgage or automobile loan financial obligations over a three to five-year strategy, which is called treating arrears, while also resuming your routine month-to-month payments. In some situations, Chapter 13 likewise enables a decrease of particular lorry loan balances to the cars and truck's present value, an idea understood as cramdown, though in-depth guidelines use.

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Concern and nondischargeable financial obligations, such as current earnings taxes, child assistance, spousal support, and most 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 debts are often 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 classifications so you see precisely which financial obligations will be eliminated, which should be paid, and which chapter manages them more successfully. Understanding how long each chapter lasts and what life appears like throughout the case can make the choice feel less abstract.

Soon after filing, the automated stay generally stops garnishments, suits, and the majority of collection calls. You participate in a conference of financial institutions, typically called the 341 meeting, where the trustee asks questions about your documentation and financial resources. After that, you generally wait on deadlines to pass and for the court to issue a discharge, unless the trustee needs more info or is exploring non-exempt possessions.

Estimating Bankruptcy Costs for 2026

You submit the case, and the automated stay enters into impact, stopping garnishments, foreclosure sales, and most collection activity. You propose a repayment strategy, start making regular monthly payments to the Chapter 13 trustee, and attend a 341 meeting and, in a lot of cases, a confirmation hearing where the judge thinks about whether to authorize the plan.

Many Michigan filers are surprised by how structured but workable the everyday reality can be when the plan is sensible. In Chapter 7, your main duties are to be honest, supply documents, attend your conference, and complete a required monetary education course. In Chapter 13, the included responsibilities include adhering to a budget, making every plan payment on time, and reporting considerable income changes.

Once you comprehend how each chapter works, the next step is lining that up with your goals. One core tradeoff is speed versus structure. Chapter 7 moves faster and generally involves no long-lasting payment obligations, which interest Michigan renters and house owners who are present on their mortgages and have primarily unsecured debts.