All of these blog posts provide some general bankruptcy information and concern the filing for protection under the Bankruptcy Code. They include discussions of such things as the means test, filing for Chapter 7, Chapter 13, and other such bankruptcy issues. Bankruptcy Blog PostsIf you have any questions or want to know more about the bankruptcy process then take a look at the different blogs on here and if you don’t find and answer then give us a call.

We handle bankruptcy cases all across the State of Alabama and we hope these posts can provide some useful bankruptcy information. There is a blog post on bankruptcy exemptions that explains a little about what property you can protect from being liquidated in a Chapter 7 bankruptcy. There is a blog post on the different people involved in the bankruptcy process including the role of the Trustee in handling your case. One of the jobs of the Trustee includes an evaluation of your bankruptcy estate (which is all of the property that you own) to determine if there are any assets they can possible sell and distribute money to your creditors. 

Those are some of the many blog posts about the bankruptcy process. If you have any questions or want to say something about any of our posts then feel free to leave a comment or give us a call at (205) 201-1789.

What is a Chapter 13 Payment Plan

Your bankruptcy attorney has advised you that you should file a chapter 13 bankruptcy.  This chapter of bankruptcy allows you to reorganize and repay your debts.  There are three main types of debts:  secured debts, priority debts, and unsecured debts.  In order to be able to reorganize your debts, a plan must be established which tells the bankruptcy court how you intend to pay these debts within a five-year period.

The first type of debt we will look at is a secured debt.  These types of debt are ones in which you got a loan to purchase a big-ticket item and the seller got a note or mortgage on the property.  On mortgages, you can put the arrearage (missed payments) into the plan payment.  What is a Chapter 13 Payment PlanYou will have to continue paying your monthly mortgage payment and the bankruptcy trustee will pay your back payments from your monthly plan payment.  Under certain circumstances, you can refinance your vehicle and lower the monthly payment.  Your new car payment will be paid by the bankruptcy trustee from your monthly plan payment.  Sometimes the car payment can’t be reduced, so you will continue to pay the car payment yourself and not through the plan payment.

Priority debts owed by most people are unpaid income taxes and back child support.  Once you have filed all of your tax returns and establish an amount due on your taxes, your plan payment will be set up the taxes to be paid.  If you have a tax lien, then you will probably have to pay interest on that amount.  If you owe back child support, your attorney will look at the arrearage amount and the interest amount that you owe.  Your attorney will have to discuss a proposed plan with the Alabama Department of Human Resources and receive approval before your plan payment can be calculated.  There are circumstances in which you do not have to pay 100% of your back child support during the bankruptcy with the balance to be paid after the bankruptcy is finished.  You will need to discuss with your attorney to see if you qualify for this plan payment option.

The final component of your plan payment is unsecured debts, such as credit cards, medical bills, pay day loans, and signature loans.  One of the great things about a chapter 13 plan is that you are not always required to pay 100% of your unsecured debts.  You can be required to pay from zero percent to 100% – or any amount in between.  There are many factors that your bankruptcy lawyer will consider in calculating the unsecured debt portion of your plan payment.  

In summary, your chapter 13 plan payment consists of secured debts, any priority debts, and unsecured debts.  Each debt is treated differently in calculating your plan payment.  It isn’t as easy as dividing all of your debt by sixty months like a loan.  Plan payments are very flexible, and your attorney can give you an estimate of your plan payment at your initial appointment.

Is it Better to File Bankruptcy or Just Not Pay

            When you are feeling overwhelmed by debt, it is common to ignore the situation and  wish it would just go away.  Unfortunately, the problems don’t go away and, in fact, just get worse.  You try ignoring the bills and collection letters, but they just keep coming.  Should you file bankruptcy or hope the creditors will eventually leave you alone?

            There are so many advantages to filing bankruptcy rather than ignoring the debt.  One of the most important things about bankruptcy is the “automatic stay.”  This is a legal way to stop creditors from harassing you about the debt you owe.  The automatic stay remains in effect during the entire time you are in your bankruptcy case. Is it better to file bankruptcy or just not pay debtsIf a creditor violates the automatic stay, you can sue that creditor in bankruptcy court.  The automatic stay is so powerful that its enforcement by the court continues after your bankruptcy case is finished and discharged.  Under the automatic stay, creditors cannot call you, write letters to you, sue you, or communicate with you in any way.    If you just stop paying your debts rather than file bankruptcy, creditors are free to harass you and continue to make your life miserable.

            A second advantage is that bankruptcy offers two options to handle your debt.  Chapter 7 is a bankruptcy case in which you can keep property while not having to pay your unsecured debts.  Unsecured creditors include credit cards, medical bills, and payday loans.  Chapter 7 bankruptcy is the legal way to not pay debt.  Chapter 13 is a plan to reorganize and repay debt. There are many options to repay debt, and your bankruptcy attorney will have review your income and debts to set up a payment plan for you.  Bankruptcy has options that you can afford to handle your debt.

            Another advantage is that bankruptcy stops all collection actions and lawsuits.  Creditors will file lawsuits against you if you default and do not pay your debts.  A lawsuit quickly turns into a judgment against you.  Creditors can now garnish your paycheck, garnish money from your bank accounts, and put liens on your house.  Bankruptcy immediately stops these actions — even if you already have a judgment.  Not filing bankruptcy can result in the loss of hundreds of dollars through garnishments and puts you even further behind financially.

            Bankruptcy can actually make your credit score increase.  When you ignore your debts, creditors continue to post negative information on your credit report every month.  Collection actions are also posted on your credit report.  Your credit score will continue to decline every month when you do not pay your debts or even if you do not pay on time. Bankruptcy stops creditors from posting negative information on your credit report.  It’s true that your credit score goes down when you file bankruptcy. However, your score starts going back up once you get your discharge because there is no longer any negative information being posted by creditors and your debt to income ration is improved when your unsecured debts are eliminated.  Even in the repayment plan of a Chapter 13, your credit score will still start going up.