Serious Legal Results of 2026 Bankruptcy

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

That analysis typically determines whether Chapter 7 is safe for someone with built-up equity in Michigan real estate or a paid-off automobile. In Chapter 13, exemptions still matter, but in a different method. Instead of offering non-exempt home, the law typically needs that unsecured financial institutions get at least as much through your strategy as they would have gotten 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 may select Chapter 13, make a higher monthly payment for a set number of years, and still keep the house. Since the option between Michigan and federal exemptions can tilt the balance between Chapter 7 and 13, this is not something to think at.

If Chapter 7 looks dangerous however the client's income can support a reasonable Chapter 13 payment, the recommendation might move toward Chapter 13 to protect hard-earned home. How each chapter treats your specific financial obligations typically matters more than any abstract pros and cons list. Unsecured debts, such as credit cards, medical bills, payday advance loan, and numerous personal loans, typically get similar end results in both chapters, but through various courses.

In Chapter 13, unsecured lenders typically get a share of what you pay into the strategy, which might be anywhere from a little portion to the full quantity, and the staying balance can be released at the end if you complete your strategy. Guaranteed financial obligations involve property that functions as security, such as a home loan on a home or a lien on a cars and truck.

New Legal Steps for 2026 Bankruptcy

Keeping a protected asset typically includes remaining existing on payments and, in many cases, signing a reaffirmation contract that keeps you personally liable on that particular loan after personal bankruptcy. If you are far behind and can not capture up quickly, giving up the home in Chapter 7 erases your individual liability for any deficiency balance after the lending institution sells it.

You can spread out home mortgage or auto loan financial obligations over a three to five-year plan, which is called treating arrears, while likewise resuming your routine monthly payments. In some situations, Chapter 13 likewise enables a decrease of certain car loan balances to the cars and truck's existing value, a concept referred to as cramdown, though in-depth guidelines apply.

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Priority and nondischargeable financial obligations, such as recent income taxes, kid assistance, alimony, and a lot of trainee loans, stand in a separate classification. These are generally not eliminated in Chapter 7, though the automated stay can pause some collection while the case is pending. In Chapter 13, these debts are often paid completely through your strategy before unsecured creditors get anything.

At Hensel Law Workplace, PLLC, an in-depth 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 life looks like during the case can make the decision feel less abstract.

Shortly after filing, the automated stay generally stops garnishments, claims, and most collection calls. You attend a conference of financial institutions, frequently called the 341 meeting, where the trustee asks questions about your documents and financial resources. After that, you mainly wait for due dates to pass and for the court to release a discharge, unless the trustee needs more info or is exploring non-exempt possessions.

A Step-By-Step 2026 Chapter 13 Support

You file the case, and the automatic stay goes into result, stopping garnishments, foreclosure sales, and a lot of collection activity. You propose a repayment strategy, start making regular monthly payments to the Chapter 13 trustee, and go to a 341 conference and, in lots of cases, a verification hearing where the judge thinks about whether to approve the strategy.

Numerous Michigan filers are shocked by how structured but workable the everyday truth can be when the plan is realistic. In Chapter 7, your primary duties are to be honest, offer documents, attend your meeting, and complete a required monetary education course. In Chapter 13, the added duties consist of adhering to a budget plan, making every plan payment on time, and reporting substantial earnings modifications.

As soon as you understand 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 normally includes no long-term payment commitments, which appeals to Michigan occupants and homeowners who are present on their home mortgages and have primarily unsecured debts.