Understanding Attorney Costs in 2026

In Chapter 7, the trustee looks at your properties and compares their equity to the exemptions you claim. Equity is the value of the property minus what you owe on it. If your equity in a home, vehicle, or other property is completely covered by exemptions, the trustee typically leaves that property alone.

That analysis frequently determines whether Chapter 7 is safe for somebody with built-up equity in Michigan property or a paid-off vehicle. In Chapter 13, exemptions still matter, but in a various way. Instead of offering non-exempt residential or commercial property, the law generally needs that unsecured creditors receive at least as much through your strategy as they would have gotten if you filed Chapter 7 and your non-exempt properties were sold.

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For instance, a Michigan homeowner with equity above the homestead exemption may select Chapter 13, make a greater regular monthly payment for a set number of years, and still keep your house. Since the choice 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 risky but the customer's earnings can support a realistic Chapter 13 payment, the suggestion might move towards Chapter 13 to protect hard-earned property. How each chapter treats your specific financial obligations typically matters more than any abstract benefits and drawbacks list. Unsecured financial obligations, such as charge card, medical bills, payday advance loan, and lots of personal loans, usually get comparable end results in both chapters, however through different paths.

In Chapter 13, unsecured financial institutions often get a share of what you pay into the strategy, which may be anywhere from a little portion to the complete quantity, and the staying balance can be released at the end if you complete your strategy. Protected debts include residential or commercial property that functions as security, such as a home mortgage on a home or a lien on an automobile.

Protecting Wages From 2026 Garnishment

Keeping a protected possession typically includes remaining existing on payments and, in many cases, signing a reaffirmation agreement 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 eliminates your personal liability for any shortage balance after the lender offers it.

You can expand home loan or auto loan defaults over a 3 to five-year plan, which is called curing defaults, while likewise resuming your regular monthly payments. In some scenarios, Chapter 13 likewise permits a decrease of certain vehicle loan balances to the vehicle's current worth, a concept referred to as cramdown, though detailed guidelines apply.

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Concern and nondischargeable debts, such as current income taxes, child support, alimony, and most student loans, stand in a different classification. These are normally not wiped 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 in complete through your plan before unsecured financial institutions get anything.

At Hensel Law Workplace, PLLC, a comprehensive creditor list is mapped to these classifications so you see precisely which debts will be erased, which must be paid, and which chapter manages them better. Understanding for how long each chapter lasts and what every day life appears like throughout the case can decide feel less abstract.

Quickly after filing, the automatic stay typically stops garnishments, suits, and many collection calls. You go to a conference of creditors, typically called the 341 conference, where the trustee asks questions about your documents and financial resources. After that, you mainly wait on deadlines to pass and for the court to release a discharge, unless the trustee requires more information or is exploring non-exempt properties.

Choosing Chapter 13 Vs Chapter 7 in 2026

You file the case, and the automated stay goes into effect, stopping garnishments, foreclosure sales, and many collection activity. You propose a payment strategy, start making regular monthly payments to the Chapter 13 trustee, and go to a 341 meeting and, in many cases, a verification hearing where the judge considers whether to approve the strategy.

Lots of Michigan filers are amazed by how structured but workable the day-to-day truth can be when the plan is practical. In Chapter 7, your primary duties are to be truthful, offer files, attend your meeting, and finish a required financial education course. In Chapter 13, the included duties consist of sticking to a budget, making every strategy payment on time, and reporting considerable earnings modifications.

Once 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 usually includes no long-lasting payment obligations, which interest Michigan occupants and house owners who are present on their home mortgages and have primarily unsecured financial obligations.