Guide to 2026 Chapter 13 Filing

In Chapter 7, the trustee looks at your assets 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 usually leaves that property alone.

That analysis often determines whether Chapter 7 is safe for someone with built-up equity in Michigan realty or a paid-off car. In Chapter 13, exemptions still matter, but in a various method. Instead of offering non-exempt home, the law normally requires that unsecured financial institutions receive at least as much through your plan as they would have gotten if you filed Chapter 7 and your non-exempt properties were sold.

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A Michigan house owner with equity above the homestead exemption might choose Chapter 13, make a higher month-to-month payment for a set number of years, and still keep the home. Because the choice 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 however the customer's income can support a reasonable Chapter 13 payment, the recommendation may move towards Chapter 13 to secure hard-earned home. How each chapter treats your particular financial obligations typically matters more than any abstract advantages and disadvantages list. Unsecured financial obligations, such as credit cards, medical bills, payday advance, and many personal loans, generally get comparable end results in both chapters, but through various courses.

In Chapter 13, unsecured lenders frequently receive a share of what you pay into the strategy, which might be anywhere from a little portion to the complete quantity, and the staying balance can be released at the end if you complete your plan. Protected debts involve property that serves as collateral, such as a home loan on a home or a lien on a vehicle.

Saving Income From 2026 Bankruptcy Garnishment

Keeping a protected asset often involves staying existing on payments and, in some cases, signing a reaffirmation agreement that keeps you personally responsible on that specific loan after insolvency. If you are far behind and can not capture up quickly, giving up the residential or commercial property in Chapter 7 eliminates your personal liability for any deficiency balance after the lender sells it.

You can expand mortgage or vehicle loan financial obligations over a 3 to five-year strategy, which is called curing defaults, while also resuming your routine month-to-month payments. In some scenarios, Chapter 13 also enables a reduction of specific car loan balances to the automobile's existing value, a principle known as cramdown, though detailed guidelines use.

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Concern and nondischargeable debts, such as current earnings taxes, child assistance, alimony, and many trainee loans, stand in a different category. These are usually not eliminated in Chapter 7, though the automated stay can stop briefly some collection while the case is pending. In Chapter 13, these debts are typically paid completely through your strategy before unsecured financial institutions get anything.

At Hensel Law Workplace, PLLC, a comprehensive creditor list is mapped to these categories so you see exactly which debts will be erased, which should be paid, and which chapter manages them more efficiently. Understanding the length of time each chapter lasts and what life looks like throughout the case can decide feel less abstract.

Quickly after filing, the automatic stay normally stops garnishments, lawsuits, and the majority of collection calls. You go to a meeting of financial institutions, frequently called the 341 meeting, where the trustee asks concerns about your documentation and finances. After that, you primarily await deadlines to pass and for the court to provide a discharge, unless the trustee needs more details or is checking out non-exempt properties.

Essential Filing for Bankruptcy in 2026

You file the case, and the automatic stay goes into impact, stopping garnishments, foreclosure sales, and a lot of collection activity. You propose a payment plan, start making month-to-month payments to the Chapter 13 trustee, and attend a 341 conference and, in most cases, a verification hearing where the judge considers whether to authorize the plan.

Lots of Michigan filers are shocked by how structured however workable the day-to-day reality can be when the plan is sensible. In Chapter 7, your primary duties are to be honest, provide documents, attend your conference, and finish a required monetary education course. In Chapter 13, the included obligations include adhering to a budget, making every strategy payment on time, and reporting considerable earnings modifications.

When you comprehend how each chapter works, the next action is lining that up with your objectives. One core tradeoff is speed versus structure. Chapter 7 moves quicker and usually includes no long-term payment obligations, which interest Michigan occupants and house owners who are present on their home mortgages and have primarily unsecured financial obligations.