Understanding Chapter 7 vs. Chapter 13 Bankruptcy in Alabama: Which Option Is Right for You?
When facing serious financial hardship, many individuals in Alabama wonder whether Chapter 7 or Chapter 13 bankruptcy is the better solution. The right choice depends on your income, assets, debt load, and long-term goals. Both options offer a path to financial recovery, but each has unique requirements and outcomes. If you are considering bankruptcy in Mobile, Alabama, understanding the differences is crucial to protecting your future.
At Loris Law Firm, our skilled bankruptcy lawyers in Mobile, AL assist clients in determining the best approach to achieve lasting debt relief.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is often referred to as “straight” or “liquidation” bankruptcy. It’s the most common type filed by individuals who simply can’t afford to pay their debts.
Under Chapter 7, most of your unsecured debt is completely wiped out. This includes:
- Credit cards
- Medical bills
- Payday loans
- Utility bills
- Personal loans
This form of bankruptcy is generally completed in 4 to 6 months, and once the court issues a discharge, those debts are gone forever. But there’s a catch—you must qualify. A means test compares your income to the median income in Alabama. If your income is too high, you might not be eligible.
Chapter 7 is usually a good choice if:
- You have little or no disposable income.
- You don’t own many valuable assets.
- You’re looking for a fast, clean start.
That said, there is a risk of losing some non-exempt property. Alabama law protects certain necessities—like a modest car or your home equity (up to a certain amount)—but items beyond that might be sold by the bankruptcy trustee to pay creditors.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy works differently. Instead of wiping out debt right away, it sets up a repayment plan based on your income and ability to pay. You’ll make monthly payments for three to five years. At the end of the plan, remaining qualifying debts may be discharged.
Chapter 13 is ideal for:
- Homeowners trying to stop foreclosure
- People with steady income who just need time to catch up
- Those with assets they want to keep that might not be protected under Chapter 7
In fact, Chapter 13 can actually help you keep your home or car, even if you’re months behind on payments. It also consolidates your debt into one manageable monthly payment. Our experienced bankruptcy attorneys in Mobile, AL have helped clients stop foreclosures, halt wage garnishments, and regain control of their finances with customized Chapter 13 plans.
How to Decide Between Chapter 7 and Chapter 13 Bankruptcy in Alabama
The decision between Chapter 7 and Chapter 13 depends on several critical factors:
- Income – Low income usually points to Chapter 7, while regular income can support a Chapter 13 plan.
- Assets – If protecting valuable property is a priority, Chapter 13 may be preferable.
- Types of Debt – Some debts, like student loans and certain taxes, are typically non-dischargeable. Chapter 13 may offer more flexibility in handling these obligations.
- Long-Term Goals – Chapter 13 can help manage and repay debts over time, while Chapter 7 provides a faster resolution.
Each individual’s situation is different. The bankruptcy attorneys in Mobile Alabama at Loris Bankruptcy Law Firm will evaluate your financial profile carefully to recommend the right course of action. Get started with a free evaluation here.
Choose the Right Bankruptcy Attorney in Mobile, Alabama
Finding the right solution for your financial struggles requires experienced legal guidance. Loris Bankruptcy Law Firm has been helping clients in Mobile and surrounding areas successfully file for Chapter 7 and Chapter 13 bankruptcy for decades. We understand the local court systems and know how to protect your rights while helping you rebuild your future.
If you are struggling with overwhelming debt and seeking an honest evaluation of your options, contact us today to schedule your consultation.