Differences Between Chapter 7 & Chapter 13 Bankruptcy In Montgomery, Alabama

Major Indebtedness and Bankruptcy, a Scary Situation

For some folks, declaring bankruptcy means the end of the world for them financially. For others, filing for bankruptcy means a breath of fresh air and a chance to start over again financially. All the legal language of bankruptcy is difficult for consumers to understand; thus, you need to hire a bankruptcy attorney.

  • Your debt is so out-of-control that you receive annoying creditor phone calls every day and are on the verge of home foreclosure and car repossession.
  • Your creditors call your relatives and work every day about your financial woes.

No collateral is needed for unsecured debt, such as a house or car, for debt like medical bills and credit card balances, and secured debt is backed by a house or a car. These unsecured debts are likely to be dismissed in a bankruptcy case.


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Perhaps it is time to speak with a bankruptcy attorney who will listen to your story, calculate your debt/income ratio, and help you to file for bankruptcy. Regaining a healthy financial future takes the expertise of our bankruptcy attorney, who can help you start over financially and maintain a healthy wealth-building path to financial freedom.

Your first wise step is to seek a seasoned bankruptcy attorney because there are different types of bankruptcy, and this professional financial counselor can point you in the right direction.

Filing for bankruptcy is a complex and complicated legal process that requires the expertise of someone like a bankruptcy attorney to figure out which option is best for your situation. bankruptcy means that you may have to sell your assets to pay off your debt or agree to an affordable repayment plan individualized towards your needs to pay off the debt you owe.


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Two Types of Common Bankruptcy

  • Chapter 7 is a liquidation process of assets.
  • Chapter 13 is a debt reorganization, including a repayment plan that lasts three to five years.

Chapter 7 or 13 may not touch some debts, such as,

  • Your Mortgage
  • Taxes/Government Fees
  • Student Loans
  • Child Support
  • Alimony
  • Auto Loans

Chapter 7 Bankruptcy

To be eligible for Chapter 7 depends on your income. Your attorney will examine your income and let you know if filing Chapter 7 is the right path for you.

This type of bankruptcy appoints you a trustee who gathers and sells all your assets to pay for your debt. No option may be left but to sell your home and property. Chapter 7 is an excellent option for bankruptcy if you do not own a home and if your income is limited.

Some states vary in their bankruptcy laws. For example, the bankruptcy court in your state may consider your marital status, and some of your property may be exempt from selling due to state-specific and federal guidelines. Our bankruptcy attorneys know Alabama law.


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Special exemptions include your retirement account, home equity, and personal possessions like jewelry. What is left over is sold to pay off debt. However, having a bankruptcy attorney sort through your potential exemptions would be best. Private citizens and business owners who are sole proprietors of that business can apply for Chapter 7.

Our attorney will explain the means test as it relates to Chapter 7.

Positive Benefits of Filing Chapter 7 Bankruptcy 

  • May allow lien stripping.
  • May reduce principal loan balances.
  • May allow the discharge of most debt.
  • It may allow you to retain your property and structure a payment plan to catch up on payments such as your mortgage.
  • Giving up property under Chapter 7 dismisses your loan for that property.

Negatives of Filing Chapter 7 Bankruptcy

  • It does not help you avoid the foreclosure process.
  • It does not help you avoid a repression process.
  • You must pay debt payments to your trustee for up to five years.
  • You may have to pay back some unsecured debts.
  • It harms your credit scores and reports for up to ten years.

Chapter 13 Bankruptcy

If you do not qualify for filing Chapter 7, your other option is to file Chapter 13. However, filing Chapter 13 negatively affects your credit report for up to seven years.

  • Your income must pass a means test.
  • Your income must be consistent.
  • Your unsecured debt cannot go above $419,275.
  • Your secured debt cannot go above $1, 257,850.
  • Sometimes the court chooses to reduce the balances on secured loans to make your repayment easier.

Your attorney assists you in reorganizing your debt by filing Chapter 13. If you own a home and a car, you can keep your home and car. The court requires you and your attorney to structure a debt repayment plan, and you must stick with this plan for three to five years until all debt is paid off.

Filing Bankruptcy Will Impact Your Credit Rating

Major life-changing decisions require you to think hard about filing for bankruptcy. Bankruptcy cannot be taken lightly. You have the support of our lawyer, who guides and directs your financial path.

Bankruptcy has a long-term adverse effect on your credit scores, credit report, and finances for at least nine to ten years. At this time, the reported bankruptcy disappears from your credit report and is never seen again.

Your credit rating is undoubtedly not good due to delinquent and missed payments, so filing for bankruptcy will have little effect. A bankruptcy on your credit report will cause a further decline. However, nothing lasts forever, and your credit rating gradually improves if you continue to make timely payments after bankruptcy.

Bankruptcy makes it challenging to get a loan for a car, a house, or a credit card. If you are fortunate to obtain loans, you may pay a higher than the standard interest rate.

You must prove to creditors that you can handle debt responsibly after bankruptcy and will test your creditworthiness. Creditors may remain hesitant in approving you for any loan while your bankruptcy remains on your credit report.

It takes patience during and after the bankruptcy process. Making timely monthly payments on your bills over time helps to reestablish a good credit report and score. Rebuilding a good credit report does not happen overnight.

We Can Help You Get Out of Debt

Our seasoned, experienced, professional, compassionate, and licensed attorneys have helped thousands of people get back on track with their finances. We know the bankruptcy laws in the state of Alabama. Suppose you are a resident of Montgomery, Alabama, or surrounding areas; our Montgomery bankruptcy lawyer can help you when you think you have no options.

Please suffer no longer and give us a call immediately. Being in debt and unable to find a way out is unnecessary stress on your health and family. There are options to help you.

Please know that it does cost a bit of money to file for bankruptcy in addition to our fees. However, the court sometimes waives this bankruptcy cost after looking at a financial situation. Our office can work this out with you. We offer,

  • Emergency after-hours appointments
  • Same-day emergency filings
  • Free initial consultations with no obligation
  • Appointments possibly handled by phone

Gross indebtedness and filing for bankruptcy are scary situations but are not the end of the world. Bankruptcy presents a new financial beginning for you and your family.

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