Picking Chapter 7 for Your 2026 Benefit

In Chapter 7, the trustee takes a look at your assets and compares their equity to the exemptions you declare. Equity is the value of the property minus what you owe on it. If your equity in a home, lorry, or other property is fully covered by exemptions, the trustee typically leaves that property alone.

That analysis typically figures out whether Chapter 7 is safe for someone with built-up equity in Michigan property or a paid-off lorry. In Chapter 13, exemptions still matter, however in a various method. Instead of selling non-exempt residential or commercial property, the law normally needs that unsecured creditors get a minimum of as much through your plan as they would have received if you filed Chapter 7 and your non-exempt assets were sold.

apfsc.org

A Michigan property owner with equity above the homestead exemption may select Chapter 13, make a higher month-to-month payment for a set number of years, and still keep the house. Due to the fact that the choice 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 risky but the customer's earnings can support a realistic Chapter 13 payment, the suggestion may move toward Chapter 13 to protect hard-earned property. How each chapter treats your specific debts frequently matters more than any abstract pros and cons list. Unsecured debts, such as credit cards, medical expenses, payday advance loan, and lots of personal loans, generally receive comparable end results in both chapters, however through various courses.

In Chapter 13, unsecured creditors often get a share of what you pay into the strategy, which may be anywhere from a little portion to the full quantity, and the remaining balance can be discharged at the end if you finish your strategy. Protected financial obligations involve residential or commercial property that works as collateral, such as a mortgage on a home or a lien on a car.

Total Lawyer Costs for 2026

Keeping a protected possession frequently includes staying present on payments and, in some cases, signing a reaffirmation contract that keeps you personally accountable on that specific loan after personal bankruptcy. If you are far behind and can not catch up rapidly, giving up the property in Chapter 7 erases your personal liability for any shortage balance after the lender sells it.

You can spread out home loan or auto loan financial obligations over a three to five-year strategy, which is called treating defaults, while likewise resuming your routine month-to-month payments. In some circumstances, Chapter 13 likewise permits a reduction of specific car loan balances to the vehicle's existing worth, a principle referred to as cramdown, though comprehensive rules apply.

apfsc.org

Priority and nondischargeable financial obligations, such as recent income taxes, child support, alimony, and most student loans, stand in a different category. These are generally 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 typically paid in full through your strategy before unsecured creditors get anything.

At Hensel Law Workplace, PLLC, a comprehensive financial institution list is mapped to these categories so you see precisely which financial obligations will be removed, which should be paid, and which chapter handles them more successfully. Understanding how long each chapter lasts and what every day life appears like during the case can make the choice feel less abstract.

Soon after filing, the automatic stay generally stops garnishments, suits, and many collection calls. You go to a conference of lenders, typically called the 341 conference, where the trustee asks questions about your documentation and financial resources. After that, you generally wait on deadlines to pass and for the court to provide a discharge, unless the trustee needs more info or is checking out non-exempt properties.

Protecting Income From 2026 Garnishment

You file the case, and the automatic stay goes into effect, stopping garnishments, foreclosure sales, and most collection activity. You propose a payment plan, begin making month-to-month payments to the Chapter 13 trustee, and attend a 341 meeting and, in lots of cases, a verification hearing where the judge thinks about whether to approve the strategy.

Lots of Michigan filers are surprised 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, supply files, attend your conference, and complete a needed monetary education course. In Chapter 13, the included obligations include adhering to a spending plan, making every strategy payment on time, and reporting substantial earnings changes.

When you understand how each chapter works, the next action is lining that up with your goals. One core tradeoff is speed versus structure. Chapter 7 relocations quicker and typically includes no long-lasting payment responsibilities, which attract Michigan occupants and property owners who are current on their home loans and have primarily unsecured debts.