Important Filing Requirements for 2026 Bankruptcy

In Chapter 7, the trustee looks at your properties 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, car, or other residential or commercial property is totally covered by exemptions, the trustee normally leaves that property alone.

That analysis often identifies whether Chapter 7 is safe for someone with built-up equity in Michigan realty or a paid-off car. In Chapter 13, exemptions still matter, but in a various way. Instead of selling non-exempt residential or commercial property, the law generally needs that unsecured financial institutions get at least as much through your strategy as they would have received if you submitted Chapter 7 and your non-exempt assets were sold.

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A Michigan house owner with equity above the homestead exemption may choose Chapter 13, make a greater regular monthly payment for a set number of years, and still keep the house. Since the choice in between Michigan and federal exemptions can tilt the balance in between Chapter 7 and 13, this is not something to rate.

If Chapter 7 looks dangerous but the customer's earnings can support a sensible Chapter 13 payment, the suggestion might shift toward Chapter 13 to safeguard 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 loans, and many individual loans, usually receive comparable end results in both chapters, however through various courses.

In Chapter 13, unsecured creditors 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 staying balance can be released at the end if you finish your strategy. Guaranteed financial obligations involve property that works as collateral, such as a mortgage on a home or a lien on an automobile.

Essential File for Chapter 7 in 2026

Keeping a protected asset typically includes remaining existing on payments and, in some cases, signing a reaffirmation arrangement that keeps you personally accountable on that particular loan after personal bankruptcy. If you are far behind and can not capture up rapidly, surrendering the home in Chapter 7 eliminates your personal liability for any shortage balance after the lender sells it.

You can expand mortgage or vehicle loan arrears over a three to five-year strategy, which is called treating arrears, while also resuming your routine month-to-month payments. In some circumstances, Chapter 13 likewise allows a reduction of certain automobile loan balances to the cars and truck's present value, an idea called cramdown, though comprehensive guidelines apply.

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Top priority and nondischargeable debts, such as recent earnings taxes, child assistance, alimony, and most student loans, stand in a different category. These are usually not erased in Chapter 7, though the automatic stay can pause some collection while the case is pending. In Chapter 13, these financial obligations are often paid in complete through your plan before unsecured creditors get anything.

At Hensel Law Workplace, PLLC, a comprehensive creditor list is mapped to these categories so you see exactly which financial obligations will be erased, which must be paid, and which chapter manages them better. Understanding for how long each chapter lasts and what daily life looks like throughout the case can decide feel less abstract.

Soon after filing, the automatic stay usually stops garnishments, suits, and the majority of collection calls. You attend a meeting of creditors, typically called the 341 conference, where the trustee asks concerns about your documents and finances. After that, you generally await deadlines to pass and for the court to provide a discharge, unless the trustee needs more information or is exploring non-exempt properties.

Choosing Chapter 13 Vs Chapter 7 in 2026

You file the case, and the automated stay enters into effect, stopping garnishments, foreclosure sales, and many collection activity. You propose a repayment plan, begin making monthly payments to the Chapter 13 trustee, and participate in a 341 meeting and, oftentimes, a confirmation hearing where the judge considers whether to approve the strategy.

Numerous Michigan filers are shocked by how structured but workable the day-to-day truth can be when the strategy is realistic. In Chapter 7, your primary obligations are to be sincere, supply files, attend your meeting, and finish a needed financial education course. In Chapter 13, the included responsibilities consist of sticking to a budget, making every plan payment on time, and reporting substantial earnings modifications.

When 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 quicker and generally involves no long-lasting payment obligations, which appeals to Michigan tenants and property owners who are present on their home loans and have mostly unsecured debts.