Important Filing Requirements for 2026 Bankruptcy

In Chapter 7, the trustee takes a look at your properties 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, automobile, or other residential or commercial property is fully covered by exemptions, the trustee normally leaves that asset alone.

That analysis often determines whether Chapter 7 is safe for somebody with built-up equity in Michigan realty or a paid-off car. In Chapter 13, exemptions still matter, however in a different method. Instead of selling non-exempt home, the law typically needs that unsecured lenders get at least as much through your plan as they would have gotten if you submitted Chapter 7 and your non-exempt assets were offered.

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For example, a Michigan homeowner with equity above the homestead exemption may select Chapter 13, make a greater monthly payment for a set number of years, and still keep your 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 guess at.

If Chapter 7 looks dangerous but the client's income can support a practical Chapter 13 payment, the recommendation may move towards Chapter 13 to protect hard-earned residential or commercial property. How each chapter treats your particular debts typically matters more than any abstract pros and cons list. Unsecured debts, such as charge card, medical costs, payday advance loan, and many individual loans, normally receive similar end results in both chapters, however through different paths.

In Chapter 13, unsecured financial institutions frequently receive a share of what you pay into the plan, which might be anywhere from a small percentage to the complete quantity, and the remaining balance can be discharged at the end if you complete your strategy. Secured financial obligations include property that functions as security, such as a home mortgage on a home or a lien on a car.

Deciding Between Chapter 7 and Chapter 13 for 2026

Keeping a secured asset often involves remaining present on payments and, in some cases, signing a reaffirmation contract that keeps you personally accountable on that particular loan after bankruptcy. If you are far behind and can not capture up rapidly, surrendering the home in Chapter 7 eliminates your individual liability for any deficiency balance after the loan provider offers it.

You can expand mortgage or vehicle loan arrears over a 3 to five-year strategy, which is called treating arrears, while likewise resuming your routine month-to-month payments. In some circumstances, Chapter 13 also permits a decrease of specific lorry loan balances to the car's existing worth, an idea referred to as cramdown, though comprehensive guidelines use.

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Priority and nondischargeable debts, such as recent income taxes, kid assistance, spousal support, and the majority of trainee loans, stand in a separate category. These are typically not erased 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 in full through your plan before unsecured creditors get anything.

At Hensel Law Office, PLLC, a comprehensive financial institution list is mapped to these categories so you see exactly which debts will be erased, which need to be paid, and which chapter manages them better. Knowing how long each chapter lasts and what life looks like during the case can make the decision feel less abstract.

Quickly after filing, the automated stay normally stops garnishments, suits, and most collection calls. You attend a conference of creditors, typically called the 341 meeting, where the trustee asks questions about your documents and finances. After that, you primarily wait for due dates to pass and for the court to issue a discharge, unless the trustee needs more details or is exploring non-exempt possessions.

Choosing Chapter 13 for Your 2026 Benefit

You submit the case, and the automated stay goes into effect, stopping garnishments, foreclosure sales, and most collection activity. You propose a payment plan, begin making monthly payments to the Chapter 13 trustee, and participate in a 341 meeting and, in a lot of cases, a verification hearing where the judge thinks about whether to authorize the strategy.

Numerous Michigan filers are shocked by how structured however manageable the everyday reality can be when the strategy is reasonable. In Chapter 7, your main obligations are to be sincere, provide files, attend your meeting, and complete a needed financial education course. In Chapter 13, the added obligations include adhering to a budget, making every strategy payment on time, and reporting significant earnings changes.

When you understand how each chapter works, the next step is lining that up with your objectives. One core tradeoff is speed versus structure. Chapter 7 moves much faster and normally includes no long-term payment responsibilities, which attract Michigan tenants and property owners who are current on their home loans and have mostly unsecured debts.