Timeline For Chapter 13 Bankruptcy In Alabama
One of the worst outcomes when confronting financial challenges is bankruptcy, according to popular belief. But declaring bankruptcy can be a calculated action that aids in bringing order to your financial situation.Which chapter of the Bankruptcy Code to file under is one of the first choices you must make when declaring bankruptcy.
Chapter 7 or Chapter 13Chapter 13 bankruptcy is the most common type of bankruptcy filed by people in Alabama. Chapter 7 bankruptcy is commonly known to attorneys, lawyers, and others as a liquidating bankruptcy , personal bankruptcy, or just plain bankruptcy. In a Chapter 13 bankruptcy, payments are made over a five-year maximum period in accordance with a plan approved by the bankruptcy court. If you are considering a Chapter 13 bankruptcy in Athens, Cullman, Decatur, Huntsville, Moulton or Scottsboro, Alabama, read below how the process works and if it is in your best interest. If you have questions, call for your free consultation at our Decatur or Huntsville office.
A Hardship Discharge Is Available
Finances are complicated and yours may change drastically even after you file for bankruptcy. If so, your lawyer can help you request a hardship discharge. This option is available if:
- Circumstances beyond your control prevent you from complying with your repayment plan
- You have already repaid as much debt as your creditors would have received under a Chapter 7 filing
Debts that do not qualify for discharge cannot be included in a hardship discharge.
Rebuilding Your Credit And Finances After Bankruptcy
When the process of bankruptcy is over, your LIT will give you a Notice of Discharge. This notice means you no longer have those debts. You are debt-free at this point, minus any other obligations that were not part of the bankruptcy. That may include secured debts on assets that qualified for exemption, taxes, child support, alimony, and student loans less than seven years old.
Now comes the process of rebuilding your credit and restoring your finances. Youve hopefully learned money management skills and know how to keep your budget. Easy ways to start new credit include secured credit cards and other new credit programs. A secured credit card is when you have an account with a credit card company that is secured by a cash deposit. Your credit limit is equal to the amount you deposit. Always follow and keep your budget. Understand what expenses you have and plan for your wants and needs.
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Chapter 13 Bankruptcy Disadvantages:
- You can file a Chapter 13 bankruptcy in as little as a few days, but the plan often takes 3 or 5 years before you are discharged.
- Another drawback addresses any additional sums of money that the debtor receives during the bankruptcy period. Thus, if the debtor receives an increase in salary, then there may be implications on your Chapter 13 plan payment.
- Chapter 13 can also be very expensive if you are in a 100% Chapter 13 Plan. In this plan, you pay back your unsecured creditors 100% of what is owed.
- Extra income in Chapter 13 bankruptcy can actually increase your monthly payment, making your Chapter 13 payment too high.
- You cannot skip a Chapter 13 bankruptcy payment, but you can often skip payments in debt settlement. That said, there are 5 options when you miss a Chapter 13 payment.
The Chapter 13 Process
First, find a bankruptcy lawyer who will give you a free evaluation and estimate on what youll have to pay to file.
The cost to file Chapter 13 bankruptcy consists of a $313 filing fee and fees charged by a bankruptcy attorney. As for documents and other information, you must provide:
- A list of creditors and the amount of their claims.
- Proof of income.
- List any properties you own and any leases in your name.
- List your monthly living expenses.
- Provide tax information, specifically your federal tax return and any statements of unpaid taxes.
Chapter 13 petitioners cannot have had a bankruptcy petition dismissed in the 180 days before filing. They must also take a course approved by the U.S. Department of Justice U.S. Trustee Program in that 180-day span.
After you file your paperwork, youll then get a letter from the court clerk notifying you, your creditors and your court-appointed trustee that collection activities on your accounts have been suspended. That means creditors have to stop hounding you for payments.
You will propose a repayment plan, and a bankruptcy judge or administrator will hold a hearing to determine whether its fair and meets legal standards. Creditors can object, but most judges allow filers to alter their plans several times.
After that, its just a matter of sticking to your repayment plan. If youre late or miss payments, the trustee could move to dismiss your Chapter 13 case. You dont want that.
How To File Chapter 13 Bankruptcy
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Chapter 13 bankruptcy lets you restructure overwhelming debts under the protection of a federal court, setting up a repayment period of three to five years.
This is also called wage earners bankruptcy, because you must have a regular income to qualify. The goal is to resolve some debts and get current on secured loans those with collateral, such as a home or car. Here’s how to figure out if Chapter 13 bankruptcy is right for you and how to file.
How Long Does Chapter 13 Bankruptcy Take
The process of filing for Chapter 13 bankruptcy can last for several months. If youre placed on a Chapter 13 payment plan, youll typically be paying off your debts for three to five years before the remainder is discharged. The length of your plan will depend on your monthly income. If your income is lower than the state median, you may be put on a three-year plan. If it is higher, you may be placed on a five-year plan.
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The Chapter 13 Methodology
Start by getting a free consultation from a bankruptcy attorney.
Filing costs and fees imposed on you by your bankruptcy attorney are what make Chapter 13 bankruptcy possible. Petitioners, or debtors, are charged by the bankruptcy court a $313 filing fee. They also need to provide:
A list of creditors with the amount owed
It is necessary to disclose the source and amount of income received by the debtor.
A listing of the debtors assets and an accounting of all leases and contracts entered into under the debtors name.
The monthly living expenses of the debtor are reduced.
Information about taxes, including a copy of the declaration of any owing taxes and the most recent federal tax returns.
Chapter 13 petitioners must declare that they have not had a bankruptcy petition denied because they refused to appear in court within the 180 days preceding the filing. Anyone filing for bankruptcy protection must also obtain credit counseling from an approved organization within 180 days.
After declaring bankruptcy, the debtor must submit a plan of repayment. To determine if the plan meets the standards of the bankruptcy code and is fair, a hearing will be held in front of a bankruptcy judge. Creditors can protest the plan. The court will make the final decision.
Although debtors may come up with a plan to make up the late payments over time through Chapter 13, all new mortgage payments must still be paid by the due date.
Repaying Debts In Chapter 13 Bankruptcy
Debtors can set their own repayment plans in Chapter 13 with the approval of the court. The plan is a central part of Chapter 13 bankruptcy, and its written out on either a federal form or one from a local court. The plan describes
- Your trustee and how much that person will get paid each month.
- How youll get the money to the trustee.
- How long the plan will last.
Not all debt will be repaid, and it will generally fall into three categories.
- Priority debt such as student loans, child support and most tax obligations generally must be paid in full.
- Secured debt such as a mortgage or car loan will ultimately be paid back over time. Any missed payments can be brought current as well.
- Payments toward unsecured debt such as outstanding credit card balances are flexible. They might be reduced, and remaining balances may even be forgiven once the repayment plan is completed.
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Can I Keep My Car If I File Chapter 7 Bankruptcy
You can generally keep your car if you file chapter 7 if the equity in the vehicle is below the exemption amount. If the vehicle is subject to a lien, the contractual payments will need to be maintained directly to the lienholder. For debtors using North Carolina exemptions, it allows an exemption in a motor vehicle of $3,500.00 so long as the vehicle was purchased more than 90 days prior to the bankruptcy filing.
Further, a debtor using North Carolina exemption laws is entitled to a $5,000.00 wildcard exemption which can be stacked on other exemptions or used independently. It may be possible to assert a $2,000 tools of trade exemption on a motor vehicle under the North Carolina exemption law if the facts support it. Married couples filing together are each entitled to an exemption.
If you are still making payments on a vehicle loan, there will be a lien that protects the lender and so if you want to keep your car in a Chapter 7 bankruptcy, you will need to make regular contractual payments on the loan.
What Does A Chapter 13 Repayment Plan Look Like
Priority debts get paid first and in full. These include most tax debts.
Secured debts involve collateral examples include auto loans and home loans. Filers must pay secured lenders at least the value of the collateral if they want to keep it.
Unsecured debts are those that have no collateral, such as credit card debt. They are paid last and may not be paid in fullor at all. The bankruptcy court will look at the debtors disposable income in deciding how much money unsecured creditors should get.
A Chapter 13 repayment plan usually takes three or five years, depending on the debtors monthly income and family size. A filer earning less than the state median for similar households generally can take three years. Anyone earning more than the state median for their household size will be given five years.
When payments are completed according to the plan, any leftover debt is discharged. Discharged means the debt is no longer owed, even if the creditor didnt get the full amount. Not all debts are dischargeable. Home mortgages, alimony, child support, some taxes, student loans and debts resulting from criminal activities cannot be discharged.
To fulfill the terms of the plan, the debtor must make all payments on time and cant take on new debts without the courts approval.
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A Chapter 13 Bankruptcy Example
What is it like to be a Chapter 13 bankruptcy applicant who succeeds?
Take Steven and Cathy as a married couple who have a $150,000 house mortgage. Steven is employed, Cathy is not, and they both apply for Chapter 13 bankruptcy protection. They also have nearly $20,000 in credit card debt and $7,000 on a car loan.
Two weeks after the petition was filed, they file a Chapter 13 repayment agreement. This shows how Stevens salary could be used to pay his vehicle and home payments and repay some of his unsecured credit cards debt. They are divided into three types of debt: priority, secured and unsecured.
Priority claims such as the cost of bankruptcy, certain taxes, or child support must all be fully paid. If an exemption is granted, secured debts such as those secured by a house or a vehicle must be fully paid according to the bankruptcy plan.
Unsecured debts such as credit cards and charge card debt have a flexible repayment plan. Before deciding how much you owe your creditors, the court will look at your income and length of repayment. This could be anything from zero to full repayment.
Steven and Cathy will have to pay all court fees, as well as past taxes. They will be able also to catch up on vehicle and mortgage payments. They will have to pay the credit card companies a fixed amount.
After their plan has been approved, the couple will start making payments to a court-appointed trustee. This trustee will keep track of their progress and distribute funds to creditors.
Determine What Chapter To File Under
After deciding that you need to file bankruptcy, you and your lawyer can determine what chapter of bankruptcy to file under. As mentioned earlier, if youre declaring personal bankruptcy you will typically file under chapters 7 or 13. This decision depends primarily, but not exclusively, on several considerations, including how much debt you have, your income, and whether you have an asset that you owe money on but want to try to protect.
In a chapter 7 bankruptcy, the trustee collects and then sells a debtors nonexempt assets and uses the resulting proceeds to pay off creditors. Some of a debtors property may be subject to liens or mortgages that still have to be paid or the property surrendered.
Chapter 13 allows for an adjustment of the debt for an individual with a regular income. This way, the debtor can pay the debt over time, usually three to five years, depending on the debtors eligibility. The debtor and his/her lawyer construct a plan for repayment. The debtor makes payments to the trustee, who then distributes the funds to the creditors. This is ideal for a debtor who wants to protect any assets that they owe on, like a home or car. When the debtor makes all the payments required, any debt remaining at the end of that designated period is discharged. If the debtors income is above a certain median, they must file a chapter 13.
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Chapter 13 Repayment Plan Proceedings
In order to file Chapter 13 bankruptcy, you have to provide an explanation for how you plan to pay back some or all of the money you owe. This starts with you providing the details of your income, including the source, frequency, and amount you make. Youll also need to list your monthly living expenses, including food, shelter, utilities, taxes, transport, etc.
For priority claims, such as child support and most tax debt, the repayment plan must establish how the debt will be repaid in whole. For secured debt, such as a mortgage or car loan, the debtor must include plans to repay at least the value of the collateral that secures the debt if they wish to keep said collateral. For unsecured claims, such as credit card debt, the debtor is required to pay all disposable income over the repayment period, but that does not need to cover the debt in full.
14 days from filing the initial bankruptcy petition, the repayment plan must be provided to the court. Within 30 days of filing, even if the plan has not yet been approved by the court, the debtor must begin making their monthly payments. From this point, the payment plan may be approved, or denied, and subsequently modified by the debtor.
Talk To A Knowledgeable Bankruptcy Chapter 7 And Chapter 13 Attorney In Cary Nc
At the Sasser Law Firm, you will work directly with a knowledgeable attorney to determine
the best way to resolve your financial difficulties. We pride ourselves on giving straightforward and honest legal advice about personal and business bankruptcies under Chapter 7, Chapter 13, and other provisions of the Bankruptcy Code.
Dont let a financial problem grow worse when help is available. Schedule a free consultation with our compassionate consumer bankruptcy attorneys in Cary, NC today. The Sasser Law Firm serves individuals and businesses throughout North Carolina, including in Wake, Harnett, Johnston, Durham, Orange, Granville, Vance, Franklin, Warren, Nash, Lee, Chatham, and Moore counties.
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A Bankruptcy Lawyer In Cary North Carolina Will Handle All Of The Paperwork Required For A Bankruptcy Filing Which Includes Preparing:
- A statement of financial affairs
- Schedules of assets and liabilities
- A schedule of current income and expenditures
- A statement of monthly net income
- Evidence of income from employers received 60 days before filing
- Information about any interest you have in federal- or state qualified education or tuition accounts
- A schedule of executory contracts and unexpired leases
- Copies of tax returns or transcripts from the most recent year .
We will be able to determine what property should be considered protected from bankruptcy. North Carolina law provides a homestead exemption, a motor vehicle exemption, and several other personal property exemptions.
Our team can also move quickly to file a bankruptcy petition with the court, which will automatically stop creditors from contacting you while you are working your way through the bankruptcy process.
Your Sasser Law bankruptcy attorney will assist and advise you on the difference between Chapter 7 and 13. We will explain every step of the process ahead of time to make sure you are prepared for questions or decisions from the bankruptcy trustee or court.
Most bankruptcy cases proceed smoothly, but sometimes disputes arise and make litigation unavoidable. If this occurs, the seasoned bankruptcy litigation team at Sasser Law Firm has extensive trial experience and the understanding of bankruptcy code required to fight for your interests all the way through appeal, if necessary.