Navigating Between 13 and 7 for 2026

In Chapter 7, the trustee looks at your possessions 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, car, or other property is totally covered by exemptions, the trustee usually leaves that property alone.

That analysis typically identifies whether Chapter 7 is safe for someone with built-up equity in Michigan property or a paid-off automobile. In Chapter 13, exemptions still matter, however in a various way. Instead of selling non-exempt home, the law typically requires that unsecured financial institutions get at least as much through your plan as they would have received if you filed Chapter 7 and your non-exempt properties were offered.

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A Michigan house owner with equity above the homestead exemption may pick Chapter 13, make a higher month-to-month payment for a set number of years, and still keep the house. Since the option 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 client's earnings can support a sensible Chapter 13 payment, the recommendation might move toward Chapter 13 to secure hard-earned home. How each chapter treats your specific debts typically matters more than any abstract advantages and disadvantages list. Unsecured financial obligations, such as credit cards, medical bills, payday advance, and many personal loans, usually get similar outcome in both chapters, however through different courses.

In Chapter 13, unsecured creditors often get a share of what you pay into the plan, which may be anywhere from a little percentage to the complete amount, and the staying balance can be discharged at the end if you finish your plan. Secured debts include property that functions as collateral, such as a home mortgage on a home or a lien on an automobile.

Picking Chapter 13 for Your 2026 Benefit

Keeping a protected property frequently includes remaining present on payments and, in some cases, signing a reaffirmation contract that keeps you personally liable on that specific loan after insolvency. If you are far behind and can not catch up rapidly, surrendering the property in Chapter 7 wipes out your personal liability for any deficiency balance after the loan provider offers it.

You can spread out home loan or auto loan defaults over a three to five-year plan, which is called curing defaults, while also resuming your routine monthly payments. In some circumstances, Chapter 13 also allows a decrease of certain automobile loan balances to the car's existing value, a principle understood as cramdown, though detailed guidelines use.

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Top priority and nondischargeable financial obligations, such as current income taxes, kid support, alimony, and the majority of trainee loans, stand in a separate classification. These are generally 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 frequently paid completely through your strategy before unsecured financial institutions get anything.

At Hensel Law Workplace, PLLC, an in-depth creditor list is mapped to these categories so you see exactly which financial obligations will be eliminated, which need to be paid, and which chapter manages them better. Understanding for how long each chapter lasts and what daily life looks like during the case can decide feel less abstract.

Soon after filing, the automated stay generally stops garnishments, suits, and a lot of collection calls. You participate in a meeting of financial institutions, typically called the 341 meeting, where the trustee asks concerns about your paperwork and finances. After that, you mainly await due dates to pass and for the court to provide a discharge, unless the trustee needs more details or is checking out non-exempt properties.

Estimating Lawyer Fees for 2026

You submit the case, and the automated stay goes into result, stopping garnishments, foreclosure sales, and a lot of collection activity. You propose a repayment strategy, begin making monthly payments to the Chapter 13 trustee, and attend a 341 conference and, in numerous cases, a confirmation hearing where the judge thinks about whether to approve the strategy.

Lots of Michigan filers are amazed by how structured but workable the daily reality can be when the strategy is sensible. In Chapter 7, your main obligations are to be honest, offer documents, attend your conference, and finish a needed monetary education course. In Chapter 13, the added responsibilities include staying with a budget plan, making every strategy payment on time, and reporting considerable income changes.

When you understand how each chapter works, the next step is lining that up with your goals. One core tradeoff is speed versus structure. Chapter 7 moves quicker and normally includes no long-lasting payment commitments, which attract Michigan renters and homeowners who are existing on their home loans and have mostly unsecured debts.