Legal Support for 2026 Chapter 13 Filers

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

That analysis often figures out whether Chapter 7 is safe for somebody with built-up equity in Michigan property or a paid-off vehicle. In Chapter 13, exemptions still matter, but in a various method. Rather of selling non-exempt property, the law generally requires that unsecured creditors receive at least as much through your plan as they would have gotten if you filed Chapter 7 and your non-exempt assets were sold.

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For instance, a Michigan property owner with equity above the homestead exemption might select Chapter 13, make a higher regular monthly payment for a set variety of years, and still keep the home. Because the choice in between Michigan and federal exemptions can tilt the balance between Chapter 7 and 13, this is not something to rate.

If Chapter 7 looks risky however the client's earnings can support a sensible Chapter 13 payment, the recommendation might shift toward Chapter 13 to protect hard-earned property. How each chapter treats your specific debts typically matters more than any abstract pros and cons list. Unsecured debts, such as credit cards, medical costs, payday loans, and numerous individual loans, normally get comparable outcome in both chapters, but through different courses.

In Chapter 13, unsecured financial institutions typically get a share of what you pay into the strategy, which might be anywhere from a small portion to the full quantity, and the staying balance can be discharged at the end if you finish your strategy. Protected debts include property that functions as collateral, such as a home loan on a home or a lien on a car.

Should You Use Chapter 13 in 2026?

Keeping a protected possession typically includes staying existing on payments and, in many cases, signing a reaffirmation arrangement that keeps you personally accountable on that particular loan after insolvency. If you are far behind and can not capture up rapidly, surrendering the property in Chapter 7 wipes out your individual liability for any shortage balance after the loan provider offers it.

You can expand home loan or automobile loan arrears over a three to five-year strategy, which is called treating arrears, while likewise resuming your regular month-to-month payments. In some scenarios, Chapter 13 also permits a reduction of specific vehicle loan balances to the automobile's existing value, an idea known as cramdown, though comprehensive guidelines apply.

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Priority and nondischargeable debts, such as recent income taxes, child support, alimony, and a lot of student loans, stand in a separate category. These are usually not wiped out in Chapter 7, though the automated stay can stop briefly some collection while the case is pending. In Chapter 13, these debts are often paid completely through your plan before unsecured financial institutions get anything.

At Hensel Law Office, PLLC, an in-depth lender list is mapped to these categories so you see exactly which debts will be erased, which need to be paid, and which chapter handles them better. Knowing how long each chapter lasts and what daily life appears like during the case can decide feel less abstract.

Quickly after filing, the automatic stay usually stops garnishments, suits, and most collection calls. You go to a meeting of financial institutions, typically called the 341 meeting, where the trustee asks questions about your documentation and financial resources. After that, you mainly wait on deadlines to pass and for the court to issue a discharge, unless the trustee needs more details or is checking out non-exempt properties.

Navigating Between Chapter 7 and Chapter 13 for 2026

You submit the case, and the automated stay goes into result, stopping garnishments, foreclosure sales, and most collection activity. You propose a payment strategy, begin making month-to-month payments to the Chapter 13 trustee, and participate in a 341 conference and, in many cases, a confirmation hearing where the judge thinks about whether to approve the strategy.

Many Michigan filers are shocked by how structured however manageable the everyday truth can be when the plan is practical. In Chapter 7, your primary duties are to be honest, offer documents, attend your meeting, and finish a required financial education course. In Chapter 13, the included duties consist of sticking to a spending plan, making every strategy payment on time, and reporting significant income modifications.

When you comprehend how each chapter works, the next step is lining that up with your goals. One core tradeoff is speed versus structure. Chapter 7 moves faster and typically involves no long-term payment responsibilities, which appeals to Michigan occupants and homeowners who are existing on their mortgages and have mainly unsecured debts.