Financial Support for 2026 Bankruptcy Filers

In Chapter 7, the trustee looks at your assets and compares their equity to the exemptions you claim. Equity is the worth of the residential or commercial property minus what you owe on it. If your equity in a home, car, or other property is fully covered by exemptions, the trustee usually leaves that property alone.

That analysis typically figures out 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 method. Rather of selling non-exempt property, 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 possessions were sold.

apfsc.org

A Michigan homeowner with equity above the homestead exemption may select Chapter 13, make a higher month-to-month 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 in between Chapter 7 and 13, this is not something to think at.

If Chapter 7 looks dangerous but the client's earnings can support a realistic Chapter 13 payment, the suggestion might move towards Chapter 13 to protect hard-earned home. How each chapter treats your specific financial obligations often matters more than any abstract benefits and drawbacks list. Unsecured debts, such as credit cards, medical bills, payday advance, and many personal loans, generally receive comparable outcome in both chapters, however through various courses.

In Chapter 13, unsecured creditors typically get a share of what you pay into the strategy, which might be anywhere from a small percentage to the complete quantity, and the remaining balance can be released at the end if you complete your strategy. Secured financial obligations involve property that functions as security, such as a mortgage on a home or a lien on a vehicle.

Long-Term Consequences of 2026 Bankruptcy

Keeping a secured possession often involves remaining present on payments and, in many cases, signing a reaffirmation arrangement that keeps you personally accountable on that specific loan after bankruptcy. If you are far behind and can not capture up quickly, giving up the home in Chapter 7 wipes out your individual liability for any shortage balance after the lending institution sells it.

You can spread out home mortgage or vehicle loan arrears over a 3 to five-year plan, which is called curing defaults, while likewise resuming your regular monthly payments. In some circumstances, Chapter 13 likewise permits a decrease of specific lorry loan balances to the vehicle's existing worth, a concept called cramdown, though in-depth rules use.

apfsc.org

Priority and nondischargeable debts, such as recent earnings taxes, child support, alimony, and many student loans, stand in a different classification. These are typically not cleaned out in Chapter 7, though the automatic stay can stop briefly some collection while the case is pending. In Chapter 13, these debts are often paid completely through your strategy before unsecured creditors get anything.

At Hensel Law Workplace, PLLC, an in-depth creditor list is mapped to these classifications so you see precisely which debts will be erased, which should be paid, and which chapter manages them better. Understanding for how long each chapter lasts and what every day life looks like during the case can make the decision feel less abstract.

Shortly after filing, the automatic stay typically stops garnishments, suits, and most collection calls. You attend a meeting of financial institutions, typically called the 341 meeting, where the trustee asks questions about your documentation and financial resources. After that, you generally wait for deadlines to pass and for the court to issue a discharge, unless the trustee needs more info or is exploring non-exempt assets.

Guide to 2026 Bankruptcy Support

You file the case, and the automated stay enters into result, stopping garnishments, foreclosure sales, and many collection activity. You propose a repayment plan, begin making monthly payments to the Chapter 13 trustee, and go to a 341 conference and, in most cases, a confirmation hearing where the judge considers whether to authorize the plan.

Many Michigan filers are amazed by how structured but manageable the daily reality can be when the plan is realistic. In Chapter 7, your primary duties are to be sincere, supply files, attend your meeting, and finish a required monetary education course. In Chapter 13, the added obligations include staying with a spending plan, making every plan payment on time, and reporting substantial income changes.

Once you comprehend how each chapter works, the next step is lining that up with your objectives. One core tradeoff is speed versus structure. Chapter 7 moves faster and normally includes no long-term payment obligations, which interest Michigan renters and homeowners who are present on their home mortgages and have primarily unsecured financial obligations.