Important Filing Requirements for 2026 Bankruptcy

In Chapter 7, the trustee looks at your assets 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 residential or commercial property is totally covered by exemptions, the trustee typically leaves that asset alone.

That analysis frequently determines whether Chapter 7 is safe for someone with built-up equity in Michigan property or a paid-off lorry. In Chapter 13, exemptions still matter, but in a different method. Rather of selling non-exempt residential or commercial property, the law generally needs that unsecured financial institutions receive a minimum of as much through your plan as they would have received if you filed Chapter 7 and your non-exempt properties were sold.

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For example, a Michigan house owner with equity above the homestead exemption may select Chapter 13, make a greater month-to-month payment for a set variety of years, and still keep your home. Since the option 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 but the customer's earnings can support a practical Chapter 13 payment, the recommendation may shift towards Chapter 13 to protect hard-earned residential or commercial property. How each chapter treats your particular financial obligations frequently matters more than any abstract advantages and disadvantages list. Unsecured debts, such as charge card, medical expenses, payday loans, and lots of personal loans, normally receive similar outcome in both chapters, however through different courses.

In Chapter 13, unsecured financial institutions typically get a share of what you pay into the strategy, which might be anywhere from a little percentage to the complete quantity, and the remaining balance can be discharged at the end if you finish your plan. Secured debts include home that acts as collateral, such as a home mortgage on a home or a lien on a vehicle.

Serious Legal Results of 2026 Bankruptcy

Keeping a protected possession typically includes remaining current on payments and, in many cases, signing a reaffirmation arrangement that keeps you personally accountable on that particular loan after personal bankruptcy. 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 lender sells it.

You can spread out home mortgage or automobile loan financial obligations over a 3 to five-year strategy, which is called curing financial obligations, while likewise resuming your regular monthly payments. In some scenarios, Chapter 13 also allows a decrease of specific vehicle loan balances to the cars and truck's current worth, a principle understood as cramdown, though in-depth rules apply.

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Concern and nondischargeable debts, such as recent earnings taxes, child assistance, spousal support, and many student loans, stand in a separate classification. These are usually 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 frequently paid in full through your plan before unsecured financial institutions get anything.

At Hensel Law Workplace, PLLC, a detailed lender list is mapped to these categories so you see exactly which debts will be eliminated, which need to be paid, and which chapter manages them more effectively. Understanding the length of time each chapter lasts and what every day life looks like during the case can make the decision feel less abstract.

Quickly after filing, the automatic stay typically stops garnishments, claims, and a lot of collection calls. You participate in a meeting of financial institutions, frequently called the 341 conference, where the trustee asks concerns about your paperwork and finances. After that, you generally await deadlines to pass and for the court to provide a discharge, unless the trustee requires more information or is exploring non-exempt possessions.

Should You Use Chapter 7 in 2026

You file the case, and the automatic stay enters into result, stopping garnishments, foreclosure sales, and the majority of collection activity. You propose a repayment plan, start making month-to-month payments to the Chapter 13 trustee, and participate in a 341 conference and, in most cases, a confirmation hearing where the judge thinks about whether to approve the strategy.

Many Michigan filers are surprised by how structured however workable the daily truth can be when the strategy is realistic. In Chapter 7, your main responsibilities are to be sincere, provide documents, attend your conference, and finish a required financial education course. In Chapter 13, the added obligations consist of staying with a budget, making every strategy payment on time, and reporting significant income 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 relocations much faster and typically involves no long-lasting payment obligations, which appeals to Michigan occupants and property owners who are existing on their home mortgages and have primarily unsecured debts.