Understanding Bankruptcy Fees in 2026

In Chapter 7, the trustee takes a look at your assets 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, lorry, or other home is completely covered by exemptions, the trustee normally leaves that asset alone.

That analysis frequently 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 way. Instead of offering non-exempt property, the law normally needs that unsecured financial institutions get at least as much through your strategy as they would have received if you filed Chapter 7 and your non-exempt assets were sold.

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For example, a Michigan property owner with equity above the homestead exemption may select Chapter 13, make a higher regular monthly payment for a set number of years, and still keep your house. Since the option 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 risky however the client's income can support a realistic Chapter 13 payment, the recommendation may shift toward Chapter 13 to safeguard hard-earned property. How each chapter treats your particular debts frequently matters more than any abstract advantages and disadvantages list. Unsecured debts, such as charge card, medical bills, payday advance loan, and many personal loans, generally get similar end results in both chapters, however through different courses.

In Chapter 13, unsecured financial institutions often get a share of what you pay into the strategy, which might be anywhere from a little portion to the full quantity, and the staying balance can be released at the end if you finish your plan. Protected financial obligations involve residential or commercial property that acts as security, such as a mortgage on a home or a lien on a car.

How to Stop Wage Garnishment Through 2026 Bankruptcy

Keeping a secured possession often includes remaining current on payments and, in many cases, signing a reaffirmation agreement that keeps you personally responsible on that particular loan after bankruptcy. If you are far behind and can not catch up rapidly, surrendering the home in Chapter 7 eliminates your individual liability for any deficiency balance after the lender offers it.

You can spread out mortgage or automobile loan defaults over a three to five-year plan, which is called curing financial obligations, while also resuming your routine monthly payments. In some circumstances, Chapter 13 likewise allows a decrease of specific lorry loan balances to the cars and truck's present worth, a concept understood as cramdown, though comprehensive rules use.

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Concern and nondischargeable financial obligations, such as recent earnings taxes, child assistance, alimony, and the majority of student loans, stand in a separate category. These are typically not erased in Chapter 7, though the automated stay can stop briefly some collection while the case is pending. In Chapter 13, these debts are typically paid completely through your strategy before unsecured lenders get anything.

At Hensel Law Office, PLLC, an in-depth creditor list is mapped to these classifications so you see exactly which financial obligations will be eliminated, which should be paid, and which chapter manages them more effectively. Knowing the length of time each chapter lasts and what life looks like during the case can decide feel less abstract.

Shortly after filing, the automatic stay usually stops garnishments, lawsuits, and the majority of collection calls. You participate in a conference of financial institutions, typically called the 341 conference, where the trustee asks concerns about your paperwork and financial resources. After that, you generally wait for deadlines to pass and for the court to provide a discharge, unless the trustee requires more information or is exploring non-exempt possessions.

Should You Use Chapter 7 in 2026?

You submit the case, and the automated stay enters into impact, stopping garnishments, foreclosure sales, and most collection activity. You propose a repayment strategy, begin making regular monthly payments to the Chapter 13 trustee, and go to a 341 conference and, in a lot of cases, a confirmation hearing where the judge thinks about whether to authorize the plan.

Numerous Michigan filers are shocked by how structured however manageable the day-to-day reality can be when the strategy is realistic. In Chapter 7, your primary duties are to be honest, offer documents, attend your conference, and finish a needed financial education course. In Chapter 13, the added obligations consist of staying with a budget, making every strategy payment on time, and reporting substantial income changes.

As soon as you understand how each chapter works, the next action is lining that up with your objectives. One core tradeoff is speed versus structure. Chapter 7 relocations much faster and typically includes no long-term payment obligations, which attract Michigan occupants and house owners who are current on their home loans and have mostly unsecured debts.