Navigating Bankruptcy Fees in 2026

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

That analysis typically determines whether Chapter 7 is safe for someone with built-up equity in Michigan real estate or a paid-off car. In Chapter 13, exemptions still matter, however in a different way. Rather of offering non-exempt residential or commercial property, the law typically requires that unsecured lenders receive at least as much through your strategy as they would have gotten if you submitted Chapter 7 and your non-exempt assets were offered.

apfsc.org

A Michigan property owner with equity above the homestead exemption may pick Chapter 13, make a greater monthly payment for a set number of years, and still keep the home. Since the choice in 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 dangerous but the customer's income can support a reasonable Chapter 13 payment, the recommendation may move toward Chapter 13 to safeguard hard-earned property. How each chapter treats your particular debts frequently matters more than any abstract advantages and disadvantages list. Unsecured debts, such as credit cards, medical expenses, payday advance loan, and many personal loans, normally get comparable end results in both chapters, but through various courses.

In Chapter 13, unsecured creditors frequently get a share of what you pay into the plan, which may be anywhere from a little portion to the full amount, and the remaining balance can be released at the end if you finish your plan. Protected debts include residential or commercial property that works as collateral, such as a mortgage on a home or a lien on a cars and truck.

Stop Wage Garnishment Through 2026 Bankruptcy

Keeping a secured asset typically includes remaining present on payments and, in many cases, signing a reaffirmation agreement that keeps you personally responsible on that particular loan after bankruptcy. If you are far behind and can not capture up rapidly, surrendering the property in Chapter 7 eliminates your personal liability for any shortage balance after the lender offers it.

You can spread out mortgage or automobile loan financial obligations over a three to five-year plan, which is called treating financial obligations, while likewise resuming your routine month-to-month payments. In some scenarios, Chapter 13 also allows a decrease of certain car loan balances to the automobile's current value, an idea referred to as cramdown, though in-depth guidelines apply.

apfsc.org

Priority and nondischargeable financial obligations, such as recent income taxes, kid assistance, alimony, and many student loans, stand in a separate category. These are typically not eliminated in Chapter 7, though the automatic stay can stop briefly some collection while the case is pending. In Chapter 13, these debts are typically paid completely through your plan before unsecured lenders get anything.

At Hensel Law Office, PLLC, an in-depth creditor list is mapped to these classifications so you see exactly which financial obligations will be removed, which need to be paid, and which chapter manages them better. Knowing the length of time each chapter lasts and what life appears like throughout the case can make the choice feel less abstract.

Soon after filing, the automatic stay typically stops garnishments, claims, and most collection calls. You participate in a conference of financial institutions, typically called the 341 conference, where the trustee asks concerns about your documents and financial resources. After that, you mainly wait on due dates to pass and for the court to issue a discharge, unless the trustee needs more details or is checking out non-exempt possessions.

Potential Legal Impacts of 2026 Bankruptcy

You submit the case, and the automatic stay goes into impact, stopping garnishments, foreclosure sales, and a lot of collection activity. You propose a repayment strategy, start making monthly payments to the Chapter 13 trustee, and attend a 341 meeting and, in numerous cases, a confirmation hearing where the judge considers whether to authorize the strategy.

Many Michigan filers are surprised by how structured but workable the daily truth can be when the strategy is sensible. In Chapter 7, your main obligations are to be truthful, offer documents, attend your meeting, and finish a needed financial education course. In Chapter 13, the included duties include sticking to a budget plan, making every plan payment on time, and reporting considerable income modifications.

As soon as you understand how each chapter works, the next action is lining that up with your goals. One core tradeoff is speed versus structure. Chapter 7 moves faster and generally includes no long-term payment responsibilities, which interest Michigan tenants and homeowners who are present on their mortgages and have primarily unsecured debts.