Chapter 13 Bankruptcy
Chapter 13 Bankruptcy Attorneys serving clients in Birmingham, Anniston, Tuscaloosa, Huntsville and throughout Alabama
An individual who is deeply in debt can file a Chapter 13 bankruptcy, which allows for reorganization. Only individuals can file a Chapter 13 bankruptcy; it is not available to corporations or partnerships. A Chapter 13 bankruptcy is a form of debt consolidation. The goal is to enable rehabilitation to debtors provided they fulfill a court-approved plan. This is different from Chapter 7, which offers immediate and complete relief of many debts. Chapter 13 is best for individuals with a steady income, and is referred to as a wage earner’s plan, so that debtors can afford to pay their debts in accordance with the plan.
The advantages of Chapter 13 over Chapter 7 include the ability to stop foreclosures, but a foreclosure would be reinstated upon completion of the bankruptcy, a discharge of debts of kinds not dischargeable under Chapter 7, or to prevent collection activities against non-filing co-debtors during the life of the case. Chapter 13 takes 3 to 5 years to complete the repayment plan. Shortly after filing the bankruptcy petition, the plan is created. This plan allows the debtor to repay a portion of his debts and lives within a strict budget that is monitored closely by the bankruptcy court trustee. The amount of payment and the period of the repayment plan depend on numerous factors, including the value of the debtor’s property and the amount of a debtor’s income and expenses. Secured creditors, which are those with some sort of property interest, such as a mortgage, over the assets of the debtor may be entitled to greater payment than unsecured creditors.
If a debtor can’t make the required monthly payments, the Chapter 13 bankruptcy fails and the debts will remain unless the debtor converts to a Chapter 7 bankruptcy. In cases where the failure to complete all payments under the chapter 13 plan was due to circumstances for which the debtor should not be held accountable, the bankruptcy court may grant a “hardship discharge”.