Total Bankruptcy Costs for 2026

In Chapter 7, the trustee takes a look at your possessions and compares their equity to the exemptions you claim. Equity is the worth of the home minus what you owe on it. If your equity in a home, vehicle, or other home is totally covered by exemptions, the trustee usually leaves that possession alone.

That analysis often figures out whether Chapter 7 is safe for somebody with built-up equity in Michigan realty or a paid-off car. In Chapter 13, exemptions still matter, however in a various way. Rather of selling non-exempt residential or commercial property, the law usually requires that unsecured creditors receive a minimum of as much through your strategy as they would have received if you filed Chapter 7 and your non-exempt possessions were offered.

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A Michigan homeowner with equity above the homestead exemption may choose Chapter 13, make a higher regular monthly payment for a set number of years, and still keep the house. Due to the fact that the option 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 dangerous however the client's earnings can support a practical Chapter 13 payment, the recommendation might move toward Chapter 13 to protect hard-earned property. How each chapter treats your particular debts often matters more than any abstract advantages and disadvantages list. Unsecured debts, such as credit cards, medical costs, payday loans, and numerous individual loans, generally get similar end results in both chapters, but through different paths.

In Chapter 13, unsecured lenders often get a share of what you pay into the plan, which may be anywhere from a small percentage to the complete quantity, and the remaining balance can be discharged at the end if you complete your plan. Guaranteed financial obligations include residential or commercial property that serves as security, such as a home mortgage on a home or a lien on an automobile.

Total Bankruptcy Fees for 2026

Keeping a secured property typically involves remaining present on payments and, in many cases, signing a reaffirmation arrangement that keeps you personally accountable on that particular loan after bankruptcy. If you are far behind and can not catch up rapidly, surrendering the residential or commercial property in Chapter 7 cleans out your individual liability for any shortage balance after the lending institution sells it.

You can spread out mortgage or auto loan financial obligations over a 3 to five-year strategy, which is called curing financial obligations, while likewise resuming your regular month-to-month payments. In some scenarios, Chapter 13 also enables a decrease of particular car loan balances to the cars and truck's present worth, a concept referred to as cramdown, though comprehensive guidelines apply.

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Top priority and nondischargeable debts, such as recent earnings taxes, child support, spousal support, and the majority of student loans, stand in a different classification. These are usually not erased in Chapter 7, though the automated stay can pause some collection while the case is pending. In Chapter 13, these financial obligations are often paid in complete through your plan before unsecured lenders get anything.

At Hensel Law Workplace, PLLC, an in-depth financial institution list is mapped to these categories so you see exactly which financial obligations will be erased, which need to be paid, and which chapter handles them more successfully. Knowing for how long each chapter lasts and what daily life looks like throughout the case can decide feel less abstract.

Shortly after filing, the automatic stay usually stops garnishments, claims, and most collection calls. You go to a conference of lenders, frequently called the 341 conference, where the trustee asks questions about your paperwork and finances. After that, you mainly await due dates to pass and for the court to provide a discharge, unless the trustee needs more details or is exploring non-exempt properties.

Should You Use Chapter 7 in 2026

You submit the case, and the automatic stay enters into result, stopping garnishments, foreclosure sales, and many collection activity. You propose a repayment strategy, begin making month-to-month payments to the Chapter 13 trustee, and go to a 341 meeting and, in numerous cases, a verification hearing where the judge considers whether to approve the strategy.

Lots of Michigan filers are surprised by how structured however workable the day-to-day reality can be when the strategy is sensible. In Chapter 7, your main responsibilities are to be sincere, supply documents, attend your meeting, and finish a needed financial education course. In Chapter 13, the included duties include adhering to a budget, making every plan payment on time, and reporting significant income changes.

When 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 faster and generally involves no long-term payment commitments, which interest Michigan renters and house owners who are present on their home loans and have primarily unsecured debts.