Essential File for Chapter 7 in 2026

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

That analysis frequently identifies whether Chapter 7 is safe for someone with built-up equity in Michigan property or a paid-off vehicle. In Chapter 13, exemptions still matter, but in a different way. Instead of selling non-exempt residential or commercial property, the law generally requires that unsecured creditors receive at least as much through your strategy as they would have gotten if you filed Chapter 7 and your non-exempt properties were sold.

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A Michigan property owner with equity above the homestead exemption may pick Chapter 13, make a higher regular monthly payment for a set number of years, and still keep the home. Due to the fact that the choice in between Michigan and federal exemptions can tilt the balance between Chapter 7 and 13, this is not something to guess at.

If Chapter 7 looks risky however the customer's income can support a realistic Chapter 13 payment, the recommendation may move towards Chapter 13 to secure hard-earned property. How each chapter treats your specific financial obligations typically matters more than any abstract advantages and disadvantages list. Unsecured financial obligations, such as charge card, medical bills, payday loans, and lots of individual loans, typically get similar outcome in both chapters, but through different courses.

In Chapter 13, unsecured financial institutions often receive a share of what you pay into the plan, which may be anywhere from a little portion to the full quantity, and the staying balance can be discharged at the end if you finish your strategy. Protected financial obligations include property that acts as security, such as a mortgage on a home or a lien on a cars and truck.

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Keeping a secured possession often involves staying existing on payments and, sometimes, signing a reaffirmation agreement that keeps you personally liable on that particular loan after insolvency. If you are far behind and can not catch up rapidly, giving up the residential or commercial property in Chapter 7 eliminates your individual liability for any shortage balance after the lending institution sells it.

You can expand mortgage or vehicle loan defaults over a three to five-year strategy, which is called curing defaults, while likewise resuming your routine monthly payments. In some circumstances, Chapter 13 also allows a reduction of particular vehicle loan balances to the car's present value, a principle referred to as cramdown, though in-depth rules use.

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Concern and nondischargeable debts, such as current income taxes, child assistance, spousal support, and most student loans, stand in a different classification. These are typically not eliminated in Chapter 7, though the automatic stay can stop briefly some collection while the case is pending. In Chapter 13, these financial obligations are often paid completely through your strategy before unsecured financial institutions get anything.

At Hensel Law Office, PLLC, a comprehensive financial institution list is mapped to these categories so you see precisely which debts will be removed, which should be paid, and which chapter manages them better. Knowing for how long each chapter lasts and what daily life appears like during the case can make the decision feel less abstract.

Soon after filing, the automated stay generally stops garnishments, lawsuits, and most collection calls. You participate in a conference of creditors, frequently called the 341 conference, where the trustee asks questions about your paperwork and financial resources. After that, you mainly wait for due dates to pass and for the court to issue a discharge, unless the trustee needs more information or is exploring non-exempt assets.

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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 strategy, start making monthly payments to the Chapter 13 trustee, and go to a 341 meeting and, in a lot of cases, a confirmation hearing where the judge thinks about whether to authorize the strategy.

Numerous Michigan filers are shocked by how structured however workable the day-to-day reality can be when the plan is realistic. In Chapter 7, your primary responsibilities are to be honest, provide files, attend your conference, and complete a needed financial education course. In Chapter 13, the added responsibilities include adhering to a budget plan, making every strategy payment on time, and reporting substantial earnings changes.

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