Important Filing Steps for 2026 Bankruptcy

In Chapter 7, the trustee takes a look at your possessions and compares their equity to the exemptions you declare. Equity is the value of the home minus what you owe on it. If your equity in a home, lorry, or other home is totally covered by exemptions, the trustee typically leaves that possession alone.

That analysis often determines whether Chapter 7 is safe for somebody with built-up equity in Michigan property or a paid-off lorry. In Chapter 13, exemptions still matter, however in a various method. Instead of offering non-exempt residential or commercial property, the law usually needs that unsecured lenders get at least as much through your strategy as they would have received if you filed Chapter 7 and your non-exempt properties were offered.

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A Michigan house owner with equity above the homestead exemption might pick Chapter 13, make a greater month-to-month payment for a set number of years, and still keep the home. Since the option in 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 customer's income can support a sensible Chapter 13 payment, the suggestion might shift toward Chapter 13 to protect hard-earned home. How each chapter treats your particular debts typically matters more than any abstract benefits and drawbacks list. Unsecured financial obligations, such as credit cards, medical costs, payday advance loan, and lots of personal loans, typically receive similar outcome in both chapters, but through various paths.

In Chapter 13, unsecured creditors typically get a share of what you pay into the plan, which may be anywhere from a small portion to the complete amount, and the remaining balance can be discharged at the end if you complete your strategy. Safe debts include property that functions as collateral, such as a home mortgage on a home or a lien on a vehicle.

Estimating Lawyer Costs for 2026

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

You can spread out home mortgage or vehicle loan arrears over a three to five-year plan, which is called treating financial obligations, while likewise resuming your routine monthly payments. In some circumstances, Chapter 13 likewise enables a reduction of particular car loan balances to the cars and truck's present value, a concept referred to as cramdown, though comprehensive rules apply.

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Priority and nondischargeable debts, such as current earnings taxes, kid assistance, spousal support, and a lot of student loans, stand in a separate category. These are typically not eliminated in Chapter 7, though the automated stay can pause some collection while the case is pending. In Chapter 13, these debts are frequently paid in full through your strategy before unsecured lenders get anything.

At Hensel Law Office, PLLC, a comprehensive 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 handles them more effectively. Understanding the length of time each chapter lasts and what daily life looks like during the case can decide feel less abstract.

Shortly after filing, the automated stay normally stops garnishments, claims, and many collection calls. You attend a meeting of financial institutions, often called the 341 meeting, where the trustee asks concerns about your documents and finances. After that, you generally wait for deadlines to pass and for the court to issue a discharge, unless the trustee requires more information or is exploring non-exempt assets.

How to Stop Garnishment Through 2026 Bankruptcy

You file the case, and the automatic stay enters into impact, stopping garnishments, foreclosure sales, and many collection activity. You propose a payment plan, start making regular monthly payments to the Chapter 13 trustee, and participate in a 341 meeting and, in most cases, a verification hearing where the judge considers whether to approve the plan.

Numerous Michigan filers are amazed by how structured but manageable the everyday reality can be when the plan is reasonable. In Chapter 7, your main duties are to be truthful, offer documents, attend your meeting, and complete a needed monetary education course. In Chapter 13, the added obligations consist of sticking to a budget plan, making every strategy payment on time, and reporting considerable earnings modifications.

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 quicker and typically includes no long-lasting payment obligations, which appeals to Michigan occupants and homeowners who are present on their home loans and have primarily unsecured debts.