Chapter 13 Bankruptcy

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a type of bankruptcy for individuals with income. Chapter 13 bankruptcy is sometimes called “wage consolidation” or a “wage earner’s plan.” Chapter 13 allows debtors to pay off all or some of their debts over a three- to five-year period. The portion you cannot afford to pay would get discharged/forgiven at the end of the case. Individuals often file for Chapter 13 because they need the protections that bankruptcy affords, such as preventing foreclosure and being able to restructure debt.

Our affordable Chapter 13 bankruptcy lawyer can help you to assess whether filing for Chapter 13 bankruptcy is your best option. While filing for bankruptcy is usually not anyone’s first choice, the protections and restructuring of debt that Chapter 13 offers can be exactly the measures needed to help you get ahead.

Why File for Chapter 13 Bankruptcy?

A Montgomery Chapter 13 bankruptcy attorney can explain how filing for Chapter 13 could benefit your situation. Some of the most commonly cited benefits and reasons for filing for Chapter 13 bankruptcy include:

• Preventing home foreclosure
• Protecting against vehicle repossession while you catch up on payments
• Potentially lowering interest rates on certain debts such as high interest car loans
• Rescheduling secured debt and extending an approved repayment plan
• Protecting against collection efforts and phone calls
• Stopping any wage garnishments and civil lawsuits.

Speak with a Chapter 13 attorney about whether filing for bankruptcy can help get you out of the hole and back in financial control.

A Montgomery Chapter 13 Bankruptcy Attorney Explains the Debt Repayment Process

Initiating Chapter 13 Filing Processes

Chapter 13 proceedings are initiated by filing a petition with the bankruptcy court. Your Chapter 13 lawyer in Montgomery will also file a statement of financial affairs, a schedule of assets and liability, a statement of current income and expenditures, a schedule of contracts for which performance is still pending, and other documents relevant to your financial condition.

After filing for Chapter 13 bankruptcy, a debtor must also file a repayment plan requiring court approval. A repayment plan outlines which creditors are being paid and how much they are being paid. Typically, a debtor makes payments to a trustee on a biweekly or monthly basis, and the trustee then disburses a debtor’s payments to creditors according to a payment plan.

Types of Claims

Debtors must also file a debt repayment plan that identifies three types of claims: priority, secured, and unsecured. Priority claims, as their name suggests, are debts that must be repaid. This includes taxes, alimony, and bankruptcy filing fees. Secured claims, on the other hand, are claims secured by property that can be taken back by the creditor.

• An example of a secured claim is a house secured by a mortgage. If you want to keep real estate, the plan can provide for you to catch up on delinquent payments and protect you from foreclosure while resuming your normal monthly payment outside of the plan.
• If you want to keep personal property, such as an automobile, the plan has flexible options for catching up on delinquent payments or paying for the vehicle entirely through the plan.

With unsecured claims, the creditor does not have a security interest in collateral to secure the debt. Examples include medical debt and credit card debt. Your debt repayment plan doesn’t necessarily require you to pay unsecured claims in full. However, the court does expect that unsecured creditors will receive as much repayment as they would have if your non-exempt assets had been liquidated in Chapter 7 bankruptcy. The plan must also pledge all your “disposable income” so that, if you can afford to pay your debts in full, you must do so.

Duration of Your Repayment Plan

Debtors must repay unsecured creditors a percentage of what they’re owed (percentage plan) or a specific amount or “pot” of money for the trustee to divide among the unsecured creditors (pot plan). To make payments, debtors can either issue regular payments or pay creditors through a payroll deduction. Debtors do not typically have contact directly with creditors after initiating the Chapter 13 process.

For how long will your Chapter 13 repayment plan be in effect?

• If your current monthly income is less than the applicable state median, your repayment plan will last from three to five years.
• Your repayment plan will last for five years, typically, if your current monthly income is greater than the applicable state median.

When all payments under a repayment plan have been made, a debtor is entitled to a discharge, which releases a debtor from all debts. By working with an affordable Chapter 13 bankruptcy lawyer throughout the bankruptcy process, you can be assured that you are following all steps necessary to complete your repayment plan.

Qualifying for Chapter 13

You must have an income to qualify for Chapter 13 bankruptcy. Some debtors will qualify for Chapter 13 bankruptcy but not for Chapter 7. Chapter 7 bankruptcy involves quickly discharging debt and requires that debtors pass a means test that compares income to statewide median levels.

Filing for bankruptcy doesn’t mean admitting defeat—it means taking a proactive step toward regaining financial control.

Chapter 13 debtors have a source of income but are also having a hard time repaying debts and staying on top of living expenses. A Montgomery Chapter 13 bankruptcy attorney can look at your financial history and help you determine whether you qualify for Chapter 13 bankruptcy and if filing is your best option.

Our Chapter 13 Lawyer in Montgomery Helps You Understand All of Your Options

Bankruptcy can be a confusing, frightening process. Chances are good that you never had to go through a situation like this previously in your life. We fully understand this, and we tailor our representation to take your unique situation into account. In your first meeting, our Montgomery bankruptcy lawyer will discuss your answers to a questionnaire you can complete upon arrival. Your answers will help us learn more about your unique situation.

Then we will discuss both bankruptcy options and non-bankruptcy options to explain why one solution may work better than another. Often, two to three different options may work for you, but it is important to choose the best one. Our Montgomery bankruptcy attorney will help guide you in that choice.

How Our Chapter 13 Attorney at Grainger Legal Is Different

Your Initial Consultation with Us

If a bankruptcy solution is the most appropriate, our Montgomery bankruptcy attorney will then explain each of the steps in the case and go over a list of items the firm will need to prepare your case. Many bankruptcy attorneys offer you only 5 to 10 minutes of their time. Grainger Legal is different. We are committed to giving more time in that first appointment. We will meet for 30 minutes to an hour to make sure our bankruptcy attorney personally helps you understand the strategy for your bankruptcy, explains the alternatives available to you, and tells you what will be needed. We feel this approach is best for our clients. Even if you have no knowledge of what filing for bankruptcy means, our bankruptcy attorney is ready to answer your questions.

Are There Any Disadvantages to Filing for Chapter 13 Bankruptcy?

Filing for bankruptcy is a decision that should be thought through with a Chapter 13 attorney. Even though Chapter 13 bankruptcy offers certain protections and benefits, it isn’t always the most strategic move for all debtors. Once you file for Chapter 13 and begin a repayment plan, there can be consequences if you are unable to meet the plan’s terms.

• Failing to make payments under a payment plan can result in creditors’ resuming collection.
• Your debt will not be discharged if payment schedules are not met.
• Court approval will be required before taking on any more debt or selling or transferring property.

Additionally, some debts cannot be discharged even by declaring Chapter 13 bankruptcy. Child support debt, alimony payments, student loans, and some unpaid taxes cannot be eliminated by Chapter 13. By consulting with a Chapter 13 lawyer in Montgomery, you can figure out which debts Chapter 13 can help address.

Frequently Asked Questions

When bankruptcy is on your mind, you’ll likely have plenty of questions—and our affordable Chapter 13 bankruptcy lawyer has answers. Here are some common questions below.

Client Testimonial

”I am thankful I reached out to Mr. Grainger’s office (at the referral of a satisfied client). From the beginning I have received nothing but professional, empathetic and exceptional service. Communication has been stellar and Mr. Grainger and his entire staff are very knowledgeable and quick to respond. I have a ways to go in cleaning up my situation, but I can count on Mr. Grainger to provide guidance and advice as necessary. I highly recommend Grainger Hawley & Shinbaum, LLC if you are looking for caring, professional and affordable legal representation for bankruptcy.” – Shelley Clark (Google Review)

There are plenty of questions to consider before filing for bankruptcy. Give our Chapter 13 lawyer in Montgomery a call at 334-260-0500 to schedule a free consultation and have your questions answered.