Chapter 13 Bankruptcy

Dothan Chapter 13 Bankruptcy Attorneys serve clients in Dothan, Enterprise, Ozark, Geneva, Eufaula, and throughout Alabama

A popular alternative to a Chapter 7 liquidation proceeding is Chapter 13 bankruptcy. Only individuals are eligible under Chapter 13; its protections are unavailable to corporations or partnerships. A Chapter 13 bankruptcy is a form of debt consolidation; all the debts the individual owes to various creditors are combined into a single bill, and a payment plan is developed such that a significant portion of the bill can be paid over the next 3 to 5 years. The goal is to enable financial rehabilitation for debtors who can fulfill the court-approved plan. Often when a debtor files for Chapter 7, creditors file objections with the aim of getting the case converted to a Chapter 13, since they are more likely to recover a substantial amount of the money they are owed. Where Chapter 7 offers immediate and complete relief of unsecured debts after liquidation, Chapter 13 forgoes total liquidation in favor of structuring a long-term payment plan, after which discharge is granted. This works best for individuals with a steady income, and is known as the “wage earner’s plan.” Thus, the “means test” often requires debtors with sufficient income to proceed under Chapter 13.

The advantages of Chapter 13 are numerous. The debtor can stop immediate foreclosures, although some would be reinstated upon completion of the bankruptcy.  Also, debts that would not be dischargeable under Chapter 7 can be discharged under Chapter 13 at the conclusion of the payment plan. Chapter 13 plans take 3 to 5 years to complete. Soon after the petition in bankruptcy is filed, the repayment plan is created. This plan provides for repayment of a portion of the debtor’s debts, as well as a strict budget the debtor must comply with, under the close monitoring of the bankruptcy trustee. The amounts of payment and the length of the repayment plan period depend on numerous factors, including the debtor property value and the debtor’s income and expenses. Usually secured creditors, such as mortgage-holding banks, are entitled to greater portions of repayment than unsecured creditors like credit card companies.

If a debtor is unable to make the required monthly payments, the Chapter 13 bankruptcy fails and the debts will remain unless the case is converted to a Chapter 7 proceeding. However, exceptions to this general rule exist, such as in cases where the failure to make required payments is attributable to circumstances beyond the debtor’s control. In such cases, the bankruptcy court may grant a “hardship discharge”.

If you are in need of immediate debt relief, or are considering either a Chapter 7 or Chapter 13 individual bankruptcy, call our Dothan legal team at Parkman White, LLP today for a consultation. We have the experience and expertise to guide you through the often confusing and daunting process, and we can ensure you are treated fairly and given the fullest protection under the law.  Call us today at 334-792-1900 or email us for a confidential assessment of your financial situation.