Key 2026 Bankruptcy Support and Tips

In Chapter 7, the trustee looks at your properties and compares their equity to the exemptions you claim. Equity is the value of the residential or commercial property 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 property alone.

That analysis often determines whether Chapter 7 is safe for somebody with built-up equity in Michigan genuine estate or a paid-off lorry. In Chapter 13, exemptions still matter, but in a various way. Instead of selling non-exempt home, the law generally requires that unsecured financial institutions get at least as much through your plan as they would have received if you filed Chapter 7 and your non-exempt assets were offered.

apfsc.org

For example, a Michigan homeowner 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 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 think at.

If Chapter 7 looks risky but the client's income can support a practical Chapter 13 payment, the recommendation may shift toward Chapter 13 to safeguard hard-earned property. How each chapter treats your particular financial obligations often matters more than any abstract pros and cons list. Unsecured debts, such as charge card, medical expenses, payday advance, and many individual loans, usually receive comparable outcome in both chapters, however through different courses.

In Chapter 13, unsecured lenders typically get a share of what you pay into the plan, which might be anywhere from a small portion to the complete quantity, and the remaining balance can be released at the end if you finish your plan. Secured financial obligations involve residential or commercial property that functions as security, such as a home mortgage on a home or a lien on a cars and truck.

Protecting Income From 2026 Garnishment

Keeping a protected property often includes staying present on payments and, sometimes, signing a reaffirmation agreement that keeps you personally responsible on that particular loan after bankruptcy. If you are far behind and can not capture up rapidly, surrendering the home in Chapter 7 erases your individual liability for any deficiency balance after the lending institution offers it.

You can spread out home mortgage or cars and truck loan financial obligations over a three to five-year strategy, which is called treating defaults, while also resuming your regular monthly payments. In some situations, Chapter 13 also permits a decrease of certain lorry loan balances to the cars and truck's existing value, a concept called cramdown, though detailed rules apply.

apfsc.org

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

At Hensel Law Office, PLLC, a detailed creditor list is mapped to these categories so you see precisely which debts will be eliminated, which need to be paid, and which chapter manages them more successfully. Understanding how long each chapter lasts and what life looks like throughout the case can make the choice feel less abstract.

Quickly after filing, the automated stay usually stops garnishments, lawsuits, and many collection calls. You participate in a meeting of financial institutions, typically called the 341 conference, where the trustee asks concerns about your documentation and financial resources. After that, you generally await due dates to pass and for the court to release a discharge, unless the trustee needs more information or is exploring non-exempt properties.

Navigating Between Chapter 7 and Chapter 13 for 2026

You file 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 conference and, oftentimes, a confirmation hearing where the judge considers whether to approve the plan.

Lots of Michigan filers are surprised by how structured however manageable the day-to-day reality can be when the plan is reasonable. In Chapter 7, your primary responsibilities are to be truthful, supply documents, attend your conference, and finish a needed monetary education course. In Chapter 13, the added responsibilities consist of sticking to a budget plan, making every strategy payment on time, and reporting substantial income modifications.

Once you understand how each chapter works, the next action is lining that up with your objectives. One core tradeoff is speed versus structure. Chapter 7 moves faster and usually includes no long-lasting payment responsibilities, which interest Michigan tenants and property owners who are existing on their mortgages and have mostly unsecured debts.