Step-By-Step 2026 Bankruptcy Filing

In Chapter 7, the trustee looks at your assets 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, automobile, or other residential or commercial property is completely covered by exemptions, the trustee typically leaves that asset alone.

That analysis frequently identifies whether Chapter 7 is safe for someone with built-up equity in Michigan real estate or a paid-off vehicle. In Chapter 13, exemptions still matter, however in a various method. Instead of offering non-exempt residential or commercial property, the law usually needs that unsecured financial institutions get at least as much through your plan as they would have received if you submitted Chapter 7 and your non-exempt assets were sold.

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A Michigan homeowner with equity above the homestead exemption might choose Chapter 13, make a higher 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 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 sensible Chapter 13 payment, the recommendation might shift toward Chapter 13 to secure hard-earned property. How each chapter treats your particular debts often matters more than any abstract pros and cons list. Unsecured financial obligations, such as charge card, medical costs, payday loans, and many individual loans, generally get similar outcome in both chapters, but through different paths.

In Chapter 13, unsecured lenders often receive a share of what you pay into the strategy, which might be anywhere from a little portion to the full quantity, and the remaining balance can be discharged at the end if you complete your plan. Guaranteed debts involve property that functions as security, such as a home mortgage on a home or a lien on a vehicle.

New Filing Requirements for 2026 Bankruptcy

Keeping a secured property frequently involves staying current 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 catch up rapidly, giving up the property in Chapter 7 erases your personal liability for any deficiency balance after the lending institution offers it.

You can spread out home loan or cars and truck loan defaults over a three to five-year plan, which is called curing financial obligations, while also resuming your routine monthly payments. In some scenarios, Chapter 13 also permits a decrease of particular vehicle loan balances to the cars and truck's existing worth, a concept called cramdown, though detailed rules use.

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Concern and nondischargeable financial obligations, such as current earnings taxes, kid support, spousal support, and most trainee loans, stand in a different category. These are usually not eliminated in Chapter 7, though the automated stay can pause some collection while the case is pending. In Chapter 13, these financial obligations are frequently paid in full through your strategy before unsecured lenders get anything.

At Hensel Law Workplace, PLLC, a detailed financial institution list is mapped to these classifications so you see exactly which debts will be erased, which must be paid, and which chapter manages them more efficiently. Knowing the length of time each chapter lasts and what life looks like during the case can make the decision feel less abstract.

Shortly after filing, the automated stay usually stops garnishments, claims, and many collection calls. You attend a conference of lenders, often called the 341 meeting, 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 issue a discharge, unless the trustee requires more information or is exploring non-exempt assets.

How to Filing for Chapter 7 in 2026

You submit the case, and the automated stay enters into impact, stopping garnishments, foreclosure sales, and many collection activity. You propose a repayment plan, start making regular monthly payments to the Chapter 13 trustee, and participate in a 341 meeting and, in numerous cases, a confirmation hearing where the judge thinks about whether to approve the strategy.

Many Michigan filers are shocked by how structured however manageable the everyday reality can be when the strategy is sensible. In Chapter 7, your primary responsibilities are to be truthful, offer files, attend your meeting, and finish a required financial education course. In Chapter 13, the added duties include sticking to a budget, making every plan payment on time, and reporting considerable income changes.

As soon as you comprehend how each chapter works, the next action is lining that up with your objectives. One core tradeoff is speed versus structure. Chapter 7 relocations faster and normally includes no long-lasting payment obligations, which appeals to Michigan occupants and property owners who are present on their home mortgages and have mainly unsecured financial obligations.