Decatur AL Chapter 13 Bankruptcy Lawyer
Ferguson & Ferguson
Attorneys at Law
Do you have questions about Chapter 13 bankruptcy? If yes, you are in the right place, and we are here to help you with your questions. Chapter 13 bankruptcy is called the wage earner’s plan and allows people with a regular income to develop a plan for repayment of debt. Even people who are self-employed in Alabama can file for Chapter 13 bankruptcy. The goal of most any personal bankruptcy is to discharge your existing debts by repaying all or a portion of your debts and allow you a fresh start on your finances. In other words, once your discharge is granted, you no longer need to repay the debts that were incurred before you filed your bankruptcy. Assuming you need to file a bankruptcy, the only way to determine which Chapter to file under is to first compare your options under the other available Chapters and be sure you have consulted with an experienced Huntsville or Decatur, Alabama bankruptcy attorney to properly analyze your options.
If you’re struggling to pay your bills each month, filing for bankruptcy under Chapter 13 may allow to you get back on track by reorganizing your debts into one affordable monthly payment. Chapter 13 can allow you to keep your home, cars and other possessions while dealing with their creditors. If you have questions, we are here to help. Our offices are in Huntsville and Decatur, Alabama, but we handle Chapter 13 cases throughout North Alabama, including Athens, Scottsboro, Moulton and Cullman. Call now to get your free consultation. Call 256-534-3435 or 1-800-752-1998. We are here to help.
How Can Chapter 13 Bankruptcy Help Me?
When someone files for bankruptcy under Chapter 13 of the Bankruptcy Code, their aim is to have the opportunity to repay some or all the debts in their name, in better terms, i.e. lower or no interest. Unlike Chapter 7 which involves liquidation of assets, this process involves restructuring debts which allow the debtor to use whatever income they may have in the future to pay off the creditors. Filing Chapter 13 Bankruptcy is thus applicable for a debtor who has a regular income, but desires to repay their creditors but is in financial difficulty. The maximum amount of time to pay back creditors is 5 years. Among other things, it offers great opportunities to pay off past due mortgage arrearages or car payments over 36-60 months, giving you time to catch up and keep your property. It is often referred to as a “mini-Chapter 11” by many bankruptcy attorneys and lawyers because you usually repay something to your creditors and you retain your property and make payments under a Plan. Chapter 13 can help you protect and keep all your assets, stop foreclosure sales and catch up on past due mortgage payments over time, remove liens, such as second mortgages, on your property, discharge unsecured debts (such as credit cards, medical bills, certain taxes, and more) by doing an affordable repayment plan from 0%-100% and repay debts with zero percent interest.
Overview of Chapter 13 in Alabama
Chapter 13 bankruptcy is a debt repayment plan for individuals, but the repayment can be anywhere from 0% to 100% of your unsecured debt. Even a 100% repayment plan in a Chapter 13 case can often be a much better deal than trying to repay your creditors outside of bankruptcy, because you pay zero percent (0%) interest in a Chapter 13 case. A bankruptcy attorney can determine what your payment is likely to be. There are some court and trustee’s fees, but let an attorney evaluate your budget and see what you can accomplish in Chapter 13 and compare that to your other options.
One purpose of chapter 13, as opposed to a chapter 7, is to enable a debtor to retain certain assets (for example, your home) that might otherwise be liquidated by a chapter 7 Trustee. It also provides an alternative to Chapter 7 when you have too much “disposable income” (your net monthly income exceeds your net monthly expenses by too much) and usually yields much lower monthly payments than you were previously paying, after 36-60 months, you are done. Your debts are gone.
Who may file Chapter 13 bankruptcy in Alabama?
Only an individual with regular income who owes, on the date you file the petition, less than the maximum allowed in unsecured debt and less than the maximum in secured debts. The debts used to calculate these limits must also be noncontingent and liquidated, meaning that they must be for a certain, fixed amount (or easily determinable amount) and not subject to any conditions or bona fide disputes. If they are legitimately disputed or not liquidated, then those amounts may not be factored into the debt limit calculations. You may be required to do a Chapter 13 if your annual income exceeds the median income for the region where you are filing and if the “means test” shows you have more than $100-$167 per month to pay to your creditors. Also at that time, your allowable monthly expenses will primarily be whatever is allowed under local IRS guidelines.
Advantages to a Alabama Chapter 13 Payment Plan
- Receive automatic stay and immediately stop home foreclosure, an auto repossession, wage garnishment, and help to consolidate your debt into one monthly payment.
- If you choose and you can afford the payment plan, you can keep all your property, exempt and non-exempt.
- While debts are not canceled as in a Chapter 7 discharge they can be reduced under a Chapter 13 payment plan.
- You have immediate protection against creditor’s collection efforts and wage garnishment.
- More debts are considered to be dischargeable (including debt you incurred on the basis of fraud and credit card charges for luxury items immediately prior to filing).
- If the Chapter 13 plan provides for full payment, any co-signers are immune from the creditor’s efforts.
- You have protection against foreclosure on your home by your lender as long as you meet the terms of the plan.
- You have more time to pay debts that can’t be discharged by any chapter (like taxes or back child support).
- If the fair market value of your property is less than the total amount owed to the 1st mortgage, then you can eliminate the security interest to any junior lienholders and treat them as general unsecured creditors in your plan (thereby being able to possibly pay them less than 100%). This can be a tremendous benefit that your attorney can assist with accomplishing.
- You can file a Chapter 13 at any time.
- You can file repeatedly.
- You can separate your creditors by class where different classes of creditors receive different percentages of payment. This enables you to treat debts where there is a co-debtor involved on a different basis than debts incurred on your own.
- You may be able to get rid of junior liens on your real property (known as a “lien strip”).
- Certain tax repayments can be made easier by virtue of elimination of interest payments.
Disadvantages to a Alabama Chapter 13 Payment Plan
- You create a payment plan where you use your post-bankruptcy income. This ties up your cash over the Chapter 13 plan period.
- Legal fees are higher since a Chapter 13 filing is more complex.
- Your plan and therefore your debt will last for 3 to five years.
- You are involved in the bankruptcy court process for the term of the 3-5 year plan.
- Stockbrokers, and commodity brokers cannot file a Chapter 13 bankruptcy petition.
How does Chapter 13 work and how long does it last?
You must have “regular income”. This means you must have some source of income that is regular or at least can be averaged regularly on an annual basis, for example. You are usually required to pay all of your disposable income to the Trustee (through your Plan) for 36-60 months. Your disposable income is defined as income received by you in the 6 calendar months prior to filing (see current monthly income) minus expense that is reasonably necessary for the maintenance and support of you or your dependents. The key word in the definition is “reasonably”. For example, if you are used to spending $1,000 a month on a car, you would not be allowed that much of an expense for that since that is not considered “reasonable”. Many of the figures used in this calculation are fixed amounts generated by the Internal Revenue Service based on geographic location. They aren’t necessarily what your actual expenses are. This is one of the big changes under the 2005 new bankruptcy laws.
Plan payments last for 36 to 60 months, depending on certain numerical eligibility requirements. Therefore, if your payment analysis shows, for example, that your disposable income is $200.00 per month (above and beyond your normal living expenses), you would pay that each month to the Chapter 13 bankruptcy Trustee, who would disperse it pro rata among your creditors. At the end of 36 (or 60) months, you are discharged from all dischargeable unsecured debts, regardless of how much your creditors have received. In most bankruptcy courts, including those in Alabama, $150-$200 is likely the minimum payment one can make in a Chapter 13 case. Any less than that and you’re essentially filing a Chapter 7 case and trying to get the benefits of Chapter 13, so that usually isn’t going to be acceptable, although there are always exceptions.
In addition to your plan payments, you must stay current with any ongoing obligations you have to secured creditors, such as on your mortgage. Chapter 13 (or any chapter of bankruptcy for that matter) only affects debts that you owe on or before you filed the bankruptcy. Therefore, on your mortgages and other secured debts, your monthly Plan payment goes to pay any arrearages (past due amounts) that existed on the date you file and you can repay that arrearage over the life of the Plan; but, you must stay current from the filing date forward with any mortgage payments, etc.
Secured debts (your mortgages) must be repaid in full, but Chapter 13 enables you to cure the defaults (reinstate the loans) over 36 months (or up to 60 months with creditor consent and court approval). You also have the ability to eliminate junior liens from your real property under certain circumstances and restructure mortgage and certain other payments. Another thing to bear in mind is that approval of any Chapter 13 Plan of repayment requires a determination by the court that the case is filed and the plan proposed in good faith.
How much will I have to pay each month?
The size of your monthly plan payments is determined in part by the amount of your disposable income. If your current budget shows you can afford to pay more than that amount, the Trustee in your case will seek to have your payment amount increased (if you are paying less than 100% of your unsecured debts through the plan). Assessing the amount you will pay in a Ch. 13 is very tricky and is one of the reasons you need an experienced lawyer and attorney
Another “catch” is that you must pay out at least as much in the Chapter 13 Plan as your creditors would have gotten if you filed a Chapter 7 case. Therefore, if you have a lot of non-exempt assets, you would need to account for this in your plan. Depending on what your disposable income is, you may have to sell some of your non-exempt assets to fund your Chapter 13 plan. If this is the case, you might just as well file a Chapter 7, but not necessarily. If you miss any payments at all that are due under your Plan, your case will be dismissed by the Court. Lastly, you cannot borrow money (incur new debt) exceeding approximately $250.00 during the pendency of your case (usually 3 years), without first obtaining court approval. This can be somewhat of a problem if, for example, your car lease expires and you need to get a new car during this period.
How Can We Help?
Your Chapter 13 Bankruptcy case begins by filing a petition with the bankruptcy court in Decatur, Alabama. You will be asked to submit to the court the following: a current listing of your assets and liabilities, a list of your current income and expenditures, a schedule of certain loan contracts and unexpired leases and a complete statement of your financial affairs. Your knowledgeable attorney from Ferguson & Ferguson will explain this all to you and assist you in gathering all of the necessary paperwork. You may be eligible to file Chapter 13 if you have a current regular income. Chapter 13 will allow you to keep your property and pay off your debts over time, usually three to five years, pursuant to a court-approved repayment plan as well as approved financial counseling. Most importantly, perhaps, Chapter 13 offers you the opportunity to save your home from foreclosure. By filing Chapter 13 bankruptcy, you can stop foreclosure; however, you must be able to make all mortgage payments during this time. Another advantage of filing for Chapter 13 bankruptcy protection is that it will allow you to repay your other debts over the life of your Chapter 13 plan, often resulting in lower payments. Chapter 13 also has a special provision that may protect any co-signers you may have. In addition, you will have no direct contact with creditors while under Chapter 13 protection. If you are having problems paying your bills, call us now for a free bankruptcy consultation. Our bankruptcy lawyers can give you the bankruptcy information you need now to help you find the best path to a financially stable future. The right choice in legal help today can make a major difference as you begin to build for a better tomorrow. We understand bankruptcy laws, and we are here to help. Call now. Call 256-534-3434 or 1-800-752-1998.
Huntsville Office Location:
303 Williams Avenue SW
Huntsville, AL 35801
Decatur Office Location:
401 Lee Street, Suite 607A
Decatur, AL 35601