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 the Difference Between Chapter 7 and Chapter 13?

  There are several different chapters of bankruptcy. Chapter 11 is for corporations. Chapter 12 is for family farmers. There are even special chapters of bankruptcy just for railroads and cities.  However, the most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 or 13 BankruptcyChapter 7 is generally known as a liquidation bankruptcy and lasts about four to five months while Chapter 13 is a payment plan that lasts three to five years. 

            Chapter 7 bankruptcy allows you to walk away from unsecured debts, such as credit cards, pay day loans, and medical bills.  You won’t have to pay those debts back.  Secured debts, such as a mortgage, vehicle loans, and title pawns are treated differently depending on what you want to do.  If you want to keep your house and vehicles, then you must keep paying for them and be current on your payments.  You will sign an agreement with the creditor called a Reaffirmation Agreement and you continue to pay that debt at the same monthly amount you have always paid.  If you can’t afford to keep your house or vehicle, you can give it back to the creditor and walk away owing nothing. 

            Chapter 13 is a debt consolidation bankruptcy with a monthly payment plan.  Payment plans are three to five years. A payment plan is made specifically for each person, so the options on how to structure your particular plan are endless.  Some of the most common items that are repaid in a payment plan are past-due mortgage payments, past-due vehicle payments, back taxes, back child support, and many secured loans.  Unlike a Chapter 7, sometimes interest rates on vehicles can be lowered and paid through the payment plan.  As far as unsecured debt, there are a lot of factors which play into whether or not you have to pay all of the debt, some of the debt, or even none of the debt.  Your local bankruptcy attorney will have to look at the equity in your property and income to make that determination. 

            If you are worried about losing your property in a bankruptcy, then you will need to be sure to file the correct bankruptcy.  A common myth for Chapter 7 is that you will lose everything that you own.  That is generally not the case.  Which Chapter should I file?If you have property with little or no equity, then you will almost certainly not lose such property in a Chapter 7.  However, if you do have property with a lot of equity, the Chapter 7 trustee can take the property to sell and pay your creditors.  In this situation, instead of filing a Chapter 7 you can keep your property by filing a Chapter 13 bankruptcy.

            One last major difference between Chapter 7 and Chapter 13 are income requirements.  Bankruptcy law has an income test called The Means Test. The purpose of The Means Test is to determine if you are eligible to file Chapter 7 or not.  The Means Test is a very long and complicated calculation based on six-months of your household income. 

            In a Chapter 7, you must pass The Means test to be able to file.  If you fail The Means Test, the only option you have is to file a Chapter 13 and set up a payment plan to repay your unsecured creditors.  The Means Test in a Chapter 13 plan does not affect whether or not you can file a Chapter 13.  The Means Test is only used to calculate disposable income to see how much you might be able to pay unsecured creditors in your plan. Chapter 7 and Chapter 13 are bankruptcies that can be filed to help people in various types of situations. Your bankruptcy attorney will look at your particular situation and make recommendations about which chapter is best for you.

IS IT BETTER TO FILE CHAPTER 7 OR CHAPTER 13?

Once you have decided to file bankruptcy, it is very important to file the chapter that is best for your situation.  There are several factors which you need to consider with your bankruptcy lawyer when choosing which type to file such as the types of indebtedness owed, vehicle payments, equity in property, and your household income.

The first thing to consider are the secured debts that you owe. A secured debt is one in which you used the loan to purchase something, such as a vehicle, home, or furniture.  Is it better to file Chapter 7 or Chapter 13A requirement for filing Chapter 7 is that you must be current on your secured debt payments in order keep the underlying property securing it.  If you are behind on mortgage or vehicle payments, and want to keep your property, then it may be better for you to file a Chapter 13 and put your missed payments in the repayment plan rather than lose your property.

Another aspect of secured debt is your monthly payment on vehicles.  In a Chapter 7, you will have to keep paying the payment that you originally agreed to pay when you got your loan if you want to keep your vehicle  A Chapter 13 has flexibility to possibly lower your monthly payment by reducing the interest rate.  The interest rate reduction will save you a lot of money over the five years, and you will get your title at the end of the term.  This is also true for title pawns on your vehicles as well.

The second thing to consider is how much equity you have in your real or personal property.  Equity is the value of the property that is above the amount you owe.  If you have vehicles that are paid off or have land or a house with a lot of equity, a trustee in Chapter 7 can sometimes take your property and sell it to pay your debts.  Chapter 7 versus Chapter 13 bankruptcyThere are bankruptcy exemptions you can use to protect your equity, but if you have equity you cannot protect then there is a danger of losing the property in Chapter 7. Instead of losing your property, you can file a Chapter 13 and set up a payment plan and keep all of your property.

The types of debts you have will make a difference in which chapter that you need to file.  Most unsecured debts are dischargeable (wiped out), such as credit cards, medical bills, and personal loans.  However, there are certain debts that you cannot get rid of in bankruptcy, such as some income taxes, student loans, and child support arrears.  If you file a Chapter 7, you will still owe these debts even after your case is completed.  A Chapter 13 will allow you to pay your past-due taxes so that you can be debt free after five years.  A Chapter 13 is especially important for payment of back child support because you can pay the arrearage amount and then request from the state court that the interest on the arrearage be waived.

If you don’t have any equity in property, not very much household income, and a lot of unsecured debt, then a Chapter 7 would be a good fit. You can get rid of your unsecured debt quickly and easily.  You will have to pay your bankruptcy attorney fees and costs up front, unlike in Chapter 13 where the costs and fees are included in the five year payment plan. However, your case will be completed in about three to four months in Chapter 7 versus five years on the Chapter 13.