Guide to 2026 Chapter 13 Filing

In Chapter 7, the trustee takes a look at your assets and compares their equity to the exemptions you claim. Equity is the worth 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 generally leaves that asset alone.

That analysis frequently identifies 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, however in a various method. Instead of selling non-exempt home, the law generally requires that unsecured creditors receive a minimum of as much through your plan as they would have received if you submitted Chapter 7 and your non-exempt possessions were offered.

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A Michigan property owner with equity above the homestead exemption may select Chapter 13, make a greater 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 between Chapter 7 and 13, this is not something to rate.

If Chapter 7 looks dangerous however the customer's earnings can support a reasonable Chapter 13 payment, the recommendation may move toward Chapter 13 to secure hard-earned property. How each chapter treats your specific debts often matters more than any abstract advantages and disadvantages list. Unsecured financial obligations, such as credit cards, medical bills, payday loans, and many individual loans, normally get similar end results in both chapters, but through various courses.

In Chapter 13, unsecured financial institutions typically receive a share of what you pay into the strategy, which might be anywhere from a little percentage to the full quantity, and the staying balance can be discharged at the end if you finish your plan. Secured debts include residential or commercial property that acts as security, such as a home mortgage on a home or a lien on an automobile.

A Step-By-Step 2026 Chapter 13 Support

Keeping a secured property frequently includes remaining current on payments and, in many cases, signing a reaffirmation arrangement that keeps you personally responsible on that particular loan after insolvency. If you are far behind and can not capture up quickly, surrendering the property in Chapter 7 wipes out your personal liability for any deficiency balance after the lender offers it.

You can spread out home mortgage or automobile loan arrears over a 3 to five-year plan, which is called treating defaults, while also resuming your routine month-to-month payments. In some situations, Chapter 13 likewise enables a decrease of particular vehicle loan balances to the cars and truck's present worth, a principle known as cramdown, though comprehensive rules apply.

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Concern and nondischargeable financial obligations, such as recent earnings taxes, child support, alimony, and most trainee loans, stand in a different classification. These are normally not cleaned out in Chapter 7, though the automated stay can stop briefly some collection while the case is pending. In Chapter 13, these financial obligations are typically paid in complete through your plan before unsecured financial institutions get anything.

At Hensel Law Office, PLLC, an in-depth creditor list is mapped to these classifications so you see exactly which debts will be erased, which should be paid, and which chapter handles them more efficiently. Understanding the length of time each chapter lasts and what every day life looks like throughout the case can decide feel less abstract.

Soon after filing, the automated stay normally stops garnishments, lawsuits, and the majority of collection calls. You participate in a conference of lenders, often called the 341 conference, where the trustee asks concerns about your paperwork and financial resources. After that, you mainly wait for deadlines to pass and for the court to provide a discharge, unless the trustee requires more info or is checking out non-exempt properties.

Saving Wages From 2026 Garnishment

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

Numerous Michigan filers are shocked by how structured but manageable the day-to-day truth can be when the strategy is sensible. In Chapter 7, your main obligations are to be sincere, supply files, attend your conference, and complete a needed financial education course. In Chapter 13, the added duties consist of sticking to a spending plan, making every strategy payment on time, and reporting substantial earnings modifications.

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 moves quicker and usually includes no long-term payment obligations, which appeals to Michigan tenants and property owners who are existing on their mortgages and have mostly unsecured financial obligations.