Navigating Bankruptcy Fees in 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 home minus what you owe on it. If your equity in a home, vehicle, or other property is fully covered by exemptions, the trustee usually leaves that property alone.

That analysis often figures out whether Chapter 7 is safe for someone with built-up equity in Michigan real estate or a paid-off lorry. In Chapter 13, exemptions still matter, but in a different method. Instead of selling non-exempt property, the law typically requires that unsecured financial institutions receive at least as much through your strategy as they would have gotten if you submitted Chapter 7 and your non-exempt properties were offered.

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A Michigan house owner with equity above the homestead exemption might select Chapter 13, make a greater 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 guess at.

If Chapter 7 looks dangerous but the customer's income can support a reasonable Chapter 13 payment, the suggestion may shift toward Chapter 13 to protect hard-earned property. How each chapter treats your particular financial obligations frequently matters more than any abstract benefits and drawbacks list. Unsecured financial obligations, such as credit cards, medical costs, payday loans, and numerous individual loans, normally receive similar end results in both chapters, however through various courses.

In Chapter 13, unsecured financial institutions often get a share of what you pay into the strategy, which may be anywhere from a small percentage to the complete quantity, and the staying balance can be released at the end if you complete your plan. Secured debts include home that functions as collateral, such as a home loan on a home or a lien on a vehicle.

Protecting Income From 2026 Bankruptcy Garnishment

Keeping a protected asset typically involves remaining present on payments and, in some cases, signing a reaffirmation arrangement that keeps you personally accountable on that specific loan after bankruptcy. If you are far behind and can not catch up quickly, giving up the home in Chapter 7 erases your individual liability for any deficiency balance after the loan provider offers it.

You can expand mortgage or auto loan defaults over a three to five-year strategy, which is called curing defaults, while likewise resuming your routine month-to-month payments. In some situations, Chapter 13 also enables a reduction of specific car loan balances to the automobile's existing worth, a principle called cramdown, though in-depth guidelines apply.

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Priority and nondischargeable debts, such as current income taxes, child support, spousal support, and many trainee loans, stand in a different classification. These are typically not erased in Chapter 7, though the automatic stay can pause some collection while the case is pending. In Chapter 13, these debts are typically paid in full through your plan before unsecured financial institutions get anything.

At Hensel Law Office, PLLC, a comprehensive creditor list is mapped to these categories so you see exactly which financial obligations will be eliminated, which need to be paid, and which chapter handles them more successfully. Understanding the length of time each chapter lasts and what daily life appears like during the case can decide feel less abstract.

Quickly after filing, the automated stay normally stops garnishments, claims, and most collection calls. You go to a conference of financial institutions, often called the 341 meeting, where the trustee asks questions about your documentation and finances. After that, you mainly 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 possessions.

Stop Wage Garnishment Through 2026 Bankruptcy

You submit the case, and the automated stay goes into impact, stopping garnishments, foreclosure sales, and the majority of collection activity. You propose a repayment plan, start making regular monthly payments to the Chapter 13 trustee, and go to a 341 meeting 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 manageable the everyday truth can be when the plan is sensible. In Chapter 7, your primary duties are to be truthful, offer documents, attend your conference, and complete a required monetary education course. In Chapter 13, the added responsibilities consist of staying with a budget plan, making every plan payment on time, and reporting considerable earnings modifications.

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 moves faster and normally includes no long-term payment commitments, which interest Michigan renters and homeowners who are existing on their home loans and have mostly unsecured debts.