New Filing Steps for 2026 Bankruptcy

In Chapter 7, the trustee looks at your possessions 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, vehicle, or other home is totally covered by exemptions, the trustee normally leaves that possession alone.

That analysis typically figures out whether Chapter 7 is safe for somebody with built-up equity in Michigan realty or a paid-off automobile. In Chapter 13, exemptions still matter, however in a different way. Rather of offering non-exempt home, the law generally needs that unsecured financial institutions get at least 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 house owner with equity above the homestead exemption may pick Chapter 13, make a higher monthly payment for a set number of years, and still keep the home. Due to the fact that the choice 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 client's income can support a reasonable Chapter 13 payment, the suggestion might move towards Chapter 13 to secure hard-earned residential or commercial property. How each chapter treats your specific debts often matters more than any abstract benefits and drawbacks list. Unsecured debts, such as credit cards, medical expenses, payday advance, and lots of individual loans, generally get similar end results in both chapters, however through various courses.

In Chapter 13, unsecured lenders often get a share of what you pay into the plan, which may be anywhere from a small portion to the complete amount, and the staying balance can be discharged at the end if you complete your strategy. Guaranteed financial obligations involve property that serves as collateral, such as a home loan on a home or a lien on a cars and truck.

Potential Legal Impacts of 2026 Bankruptcy

Keeping a protected possession typically involves remaining current on payments and, in many cases, signing a reaffirmation contract that keeps you personally accountable on that specific loan after bankruptcy. If you are far behind and can not capture up rapidly, giving up the property in Chapter 7 wipes out your individual liability for any shortage balance after the loan provider offers it.

You can spread out home mortgage or auto loan defaults over a 3 to five-year strategy, which is called curing arrears, while also resuming your routine monthly payments. In some situations, Chapter 13 also allows a decrease of specific automobile loan balances to the car's present worth, a principle referred to as cramdown, though comprehensive guidelines apply.

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Concern and nondischargeable debts, such as recent earnings taxes, child assistance, alimony, and a lot of student loans, stand in a separate classification. These are typically not erased in Chapter 7, though the automated stay can stop briefly some collection while the case is pending. In Chapter 13, these financial obligations are frequently paid in full through your strategy before unsecured lenders get anything.

At Hensel Law Office, PLLC, a comprehensive creditor list is mapped to these categories so you see precisely 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 daily life appears like throughout the case can make the choice feel less abstract.

Shortly after filing, the automatic stay generally stops garnishments, suits, and most collection calls. You go to a conference of financial institutions, frequently called the 341 conference, where the trustee asks questions about your paperwork and finances. After that, you generally await due dates to pass and for the court to provide a discharge, unless the trustee requires more info or is checking out non-exempt assets.

Long-Term Consequences of 2026 Bankruptcy

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

Numerous Michigan filers are shocked by how structured but workable the everyday truth can be when the strategy is practical. In Chapter 7, your main responsibilities are to be honest, offer files, attend your conference, and complete a needed financial education course. In Chapter 13, the included obligations include adhering to a spending plan, making every strategy payment on time, and reporting substantial earnings modifications.

Once you comprehend 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 involves no long-lasting payment responsibilities, which attract Michigan tenants and homeowners who are current on their home loans and have mainly unsecured financial obligations.