Personal Bankruptcy Chapter 13

If you are struggling financially, filing for Chapter 13 bankruptcy may help you get back on your feet. At Gina H. McDonald & Associates, LLC, we understand how burdensome financial stress can be. If you are working and receiving a regular income, we want to talk to you about your options for Chapter 13 bankruptcy. Our Alabama firm is dedicated to helping individuals through the bankruptcy process so that they can move forward with their lives.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy, also known as a wage earner’s plan, is a form of bankruptcy filing that allows you to develop a plan to repay most, if not all, of your debts over three to five years if you have a steady income. It lets you catch up on any missed payments for secured debt, such as a car loan or mortgage. Chapter 13 bankruptcy may also reduce your debt on specific unsecured debt, such as credit card debt.

What Are the Requirements for Chapter 13 Bankruptcy?

Your lawyer will evaluate your financial situation to determine whether filing for Chapter 13 bankruptcy is right for you. For example, you must have a regular income stream (salary or hourly wages) to make the necessary monthly payments. Though not typically an issue for more applicants, there are debt limits for Chapter 13 bankruptcy that could affect your ability to file.

If your attorney determines filing for Chapter 13 bankruptcy is in your best interest, you and your lawyer will develop and propose a reasonable repayment plan to the bankruptcy court. This plan sets forth how you will pay your debts over a specific length of time, typically three to five years. As further described below, you will be protected from creditors when you file for bankruptcy. In other words, any wage garnishment orders, repossession actions, or foreclosure proceedings are stayed (or halted), allowing you to proceed with your repayment plan.

How Does the Repayment Plan Work?

At Gina H. McDonald & Associates, LLC, we understand you may question whether you can manage a repayment plan under Chapter 13 bankruptcy. However, we will help you develop a reasonable plan so you can make the necessary payments.

We will file a proposed repayment plan with your bankruptcy petition (or within fourteen days of filing). The plan will show what you will pay to each of your creditors for the duration of the period and the fixed monthly amount paid to the bankruptcy trustee for distribution to the creditors according to the type of debt:

Priority Debt – This type of debt includes most tax debts, which you must pay in full.
Secured Debt – You must pay back the value of a secured asset through the plan if you want to keep the property.
Unsecured Debt – This debt may be paid in full, in part, or not at all, depending on your disposable income.

Additionally, your attorney’s fees are typically part of the repayment plan. You will also pay the bankruptcy trustee on a percentage basis, with that amount stated in the plan.

Can My Creditors Object to My Proposed Repayment Plan?

After you and your attorney prepare a proposed repayment plan and submit it to the court for approval, your creditors and the bankruptcy trustee have an opportunity to object to the plan. They may object for the following reasons:

Valuation – Sometimes, a creditor or the bankruptcy trustee disagrees with the value you assign to property as collateral for a secured loan.
Classification – The trustee or a creditor may dispute the classification of a specific debt.
Administration – The trustee could object to your plan if it appears unsustainable due to insufficient income, especially if you do not provide the necessary income documentation so they can perform an evaluation.

Finally, unsecured creditors may dispute your plan if you propose paying less than one hundred percent of the unsecured debt, and not all of your disposable income is committed under the repayment plan.

What Are the Advantages of Chapter 13 Bankruptcy?

Chapter 13 bankruptcy allows you to stay in your home. This is a significant benefit, as it stops foreclosure proceedings so you can catch up on missed mortgage payments through the repayment plan

In addition to letting you keep your house, Chapter 13 bankruptcy offers you the opportunity to consolidate what may be overwhelming debts into one manageable payment. Further, when you are in bankruptcy, you have protection from creditors. They cannot pursue the collection of your debt. Moreover, you may even be able to negotiate the amount due on secured and unsecured debt. In other words, you may only pay a pro-rata amount of your unsecured debt, with the possibility of discharging a portion of the remaining unsecured debt when the plan is complete.

You may also secure adjustments on certain loans, such as a car loan, and have the opportunity to catch up on past-due balances without worrying about late fees, collection suits, and possible repossession.

What Is the Chapter 13 Bankruptcy Filing Process?

To initiate Chapter 13 bankruptcy, you must complete a pre-bankruptcy credit counseling course from an approved provider. Once this is complete, your Alabama bankruptcy attorney will prepare and file your petition for bankruptcy with the court. The petition will include schedules of your assets, debts, and liabilities, among other categories, to show the court your complete financial picture. After these steps are complete, you can expect the following events to occur:

A Meeting of the Creditors – The court will notify your creditors about your filing. Then, a hearing is held with the bankruptcy trustee and creditors to discuss your case.
Bankruptcy Plan Confirmation – The court will review your proposed repayment plan and determine whether it will be confirmed.
Repayments – Upon confirmation of your repayment plan, you will make the agreed-upon periodic payments to the bankruptcy trustee. The trustee then distributes the funds to the creditors in order of priority.

What Happens After the Repayment Plan Is Complete?

A successful Chapter 13 bankruptcy case means you made consistent and timely payments according to the repayment plan. Once complete, any remaining eligible debts are discharged, meaning those debts are also forgiven.

What Is the Difference Between Chapter 13 Bankruptcy and Chapter 7 Bankruptcy?

Chapter 13 bankruptcy differs from Chapter 7 bankruptcy, which offers you a fresh start. Instead of repaying your debt with your income, the Chapter 7 bankruptcy trustee gathers all your assets and sells whatever is not exempt. The trustee distributes the liquidation proceeds to your creditors. Those seeking Chapter 7 bankruptcy typically have a large amount of credit card debt (or other unsecured debt). Specific debts, such as child support and student loans, cannot be discharged.

Contact Our Firm Today

Although it is possible to file for Chapter 13 bankruptcy without an attorney, let an experienced and knowledgeable Alabama bankruptcy attorney from Gina H. McDonald & Associates, LLC, guide you through this complex process. We understand you may be confused about your options, especially when you feel the weight of your debt. We’ll help you determine whether filing for Chapter 13 bankruptcy is appropriate for your circumstances and support you in all aspects of your case. Call us today for a free consultation to discuss your legal options.