ALABAMA BANKRUPTCY FAQ’S
Ferguson & Ferguson
Attorneys at Law
What is the difference in Chapter 13 and Chapter 7 bankruptcy?
The major difference between a Chapter 7 and Chapter 13 bankruptcy is that in a Chapter 7 bankruptcy you continue to pay your regular payments on your secured debt ( house and car), whereas in a Chapter 13 bankruptcy all your debts except your future mortgage payments are placed in a bankruptcy plan which is administered usually over a five (5) year period. You have to have “regular” income in order to file a Chapter 13.
Should I file a Chapter 7 or a Chapter 13?
Your income level, property owned and previous bankruptcies will greatly determine whether you may be able to file a Chapter 7 bankruptcy. If you qualify for a Chapter 7 bankruptcy then it is important to know whether a Chapter 7 bankruptcy will benefit you more than a Chapter 13. If you are behind on your mortgage, automobiles, child support, or taxes, it may be that a Chapter 13 bankruptcy will better fit your needs.
Can I keep my house and car if I file for bankruptcy?
If you are up to date in payments and do not have significant equity in your house and car then normally you may keep both in a Chapter 7 bankruptcy. Even if you are behind in payments and have equity in your house and car you may normally pay for and keep both in a Chapter 13 bankruptcy.
How will a bankruptcy filing affect my credit rating?
Your bankruptcy filing will be of record for 7 to 10 years and your credit rating will initially drop upon a bankruptcy filing. However you receive a bankruptcy discharge then any timely payments you make for instance on your house or car will improve your credit rating.
Are there any debts I cannot discharge in bankruptcy?
Typically you cannot discharge child support and alimony, fines, penalties and restitution, certain tax debts or debts arising out of someone’s death or injury due to drunk driving. Student loan debt is also rarely discharged.
Who can file for Chapter 7 or 13 bankruptcy in Alabama?
Any person, partnership, corporation, business trust, charitable or social organization can file for bankruptcy. You do not have to be a United States citizen to file for bankruptcy in Alabama.
How often can a person in Alabama file for bankruptcy?
Certainly repeat filings are discouraged by the bankruptcy court and will be more strictly scrutinized under the new bankruptcy law. Presently, Chapter 7 bankruptcies may be filed every 6 years. After October 17, 2005, Chapter 7 bankruptcies may only be filed every eight years. There is no time limitation in Chapter 13 filings at the present time.
Do I have to file with my spouse?
You have to be married to file a joint petition. However if you are married you may file jointly or individually.
What is the difference in a Chapter 7 and Chapter 13 bankruptcy in Alabama?
A Chapter 7 bankruptcy, sometimes called Liquidation or “Straight Bankruptcy,” allows most debt to be eliminated in approximately a four-to-five-month period. Some debts cannot be discharged in a Chapter 7 bankruptcy, however. Some examples of debts that cannot be discharged under a Chapter 7 bankruptcy are alimony, child support, student loans and tax debts. A Chapter 13 bankruptcy involves a repayment of some or all of your debt through the office of a bankruptcy trustee over a period up to five years. All types of debts may be paid in a Chapter 13 bankruptcy.
Is my income and my property considered when determining which bankruptcy chapter should be filed?
Schedules of your income, expenses and all of your property are required as a part of your bankruptcy petition. If you have excess income or property over your allowed exemptions you are often required to file a Chapter 13 rather than a Chapter 7.
Will I lose property if I file a bankruptcy in Alabama?
Not necessarily. The State of Alabama allows you to exempt presently up to $5,000 in real property and $3,000 in personal property in addition to other basic items like clothing and family photographs. However, if you have property over and above your exemptions, the bankruptcy court can take the property, sell it, pay off your creditors, give you your exemption back and keep the rest for other creditors. Usually paying the value of said property over and above the exemptions into a Chapter 13 plan will prevent you from losing the property.
What is a secured debt?
A secured debt is a debt backed up by property. A home mortgage and debt for an automobile would be a secured debt. An unsecured debt would be any debt not backed by property like credit card debt, a personal loan or a medical bill.
Is child support dischargeable under a Chapter 7 bankruptcy in Alabama?
No. Any debt “in the nature of support” arising from a divorce or child support case would not be dischargeable in a Chapter 7.
Does my Alabama divorce decree protect me if my ex-spouse files a bankruptcy on joint debt we held during our marriage?
No. Your divorce decree does not bind your creditors. If your ex-spouse files a bankruptcy you should seek legal advice.
Are income taxes dischargeable in a Chapter 7 bankruptcy?
Recent taxes are not dischargeable in a Chapter 7 bankruptcy. However some old tax debts as well as interest and penalties may be dischargeable. Taxes may be paid as a priority debt in a Chapter 13.
Will filing bankruptcy affect my credit rating?
Absolutely. However, most debtors are able to rebuild their credit within a few years with on-time payments to the creditors that remain after the discharge.
How long will a bankruptcy show on my credit reports?
The Bankruptcy Court has no jurisdiction over credit reporting agencies. Bankruptcy filings usually remain on credit reports from 7 to 10 years.
What are the debt requirements for Chapter 13?
First, you must determine if you are even eligible to file. One of the first requirements you should look at to determine if you are eligible to file a Chapter 13 is the amount of debt you have. You must look at your unsecured debts (like credit cards and medical bills), and your secured debt. If you can stay between the lines, you are that much closer to getting protection from foreclosure, credit card debt help, and ultimately using the Chapter 13 rules to get relief from your creditors.
What Should I Do with a Foreclosure Notice?
If you are in foreclosure, you have a very limited amount of time in which to take action. If you have decided you want to keep your home and can afford to keep your home, you can contact a bankruptcy attorney who may be able to stop the sale of your home by filing a bankruptcy. If you have decided to give up your home, you may be able to simply walk away. If your home is sold at auction for less than you owe, you will have to pay the remaining balance back to the lender. This is called a deficiency balance and it is usually 100% collectable by the bank. That means that you may still have to suffer through harassing creditor calls, wage garnishments, or threats to your other property. The deficiency balance will follow you wherever you go. A deficiency balance can be addressed in a Chapter 7.
Is there life during—and after—Chapter 13 bankruptcy?
Yes. And, for many, life after and during Chapter 13 bankruptcy is better than their lives before. Chapter 13 will put a stop to wage garnishments. You and your family aren’t being awakened at all hours of the night with harassing creditor phone calls. All of your bills are lumped into one payment that you can finally manage to pay.
Will I go to jail for not reporting increased income in bankruptcy?
As you know, you must report any changes in your income during the life of your Chapter 13. Now, this means you report not just an increase in income, but a drop in your income as well. Your plan payment is based on many factors, one of which is your ability to pay. If your ability to pay changes, you plan payment may need to be modified. You could, however, face some serious consequences. You could be kept from getting your discharge. That means all the hard work you and your attorney put into getting your family protection from foreclosure, credit card debt help, and relief from your creditors could’ve been for nothing.
After foreclosure and chapter 7, can you buy a house again?
Yes, once you’ve established a good payment history and financial responsibiliy. Often you can reestablish good credit in two years. Filing bankruptcy doesn’t mean you’ll never be able to own anything again.
Can you change from one chapter of bankruptcy to another?
You can convert a case one time to any other chapter you’re eligible for. If you change from Chapter 13 to a Chapter 7, some of your possessions may be part of the Chapter 7 estate (and can be taken and sold to pay your debts), even though they were safe from creditors under Chapter 13.
Are my bankruptcy records public?
Bankruptcy records are public, and are not protected by any privacy regulations. No sensitive personal information will be released to 3rd parties but they will learn the particulars regarding your bankruptcy case.
How long do bankruptcy cases take?
Chapter 7 bankruptcies take 2-6 months. Chapter 13, which are repayment plans, take from 3-5 years.