What’s the Difference Between Chapter 7 & Chapter 13 Bankruptcy?

different kind of bankruptcy A Chapter 7 bankruptcy involves steps that include a person liquidating their assets to repay creditors. Chapter 13 bankruptcy makes you pay back your debts through a repayment plan. It’s essential to understand their differences before making any decisions about filing for bankruptcy protection.

Why People Consider Bankruptcy Mobile AL

When someone has been struggling with debt for an extended period, it’s natural to start considering the possibility of filing for bankruptcy. However, this is a big decision that will have a significant and long-lasting impact on your financial future. The biggest reason people consider filing is that they cannot pay their debts.

For many people, it’s simple: they have more bills monthly than they earn, and there is no foreseeable way for that to change. The decision to file for bankruptcy may feel emotionally tricky. Still, it is an honest acknowledgment that you will not be able to emerge from debt on your own without the intervention and protection that may be available to you under the law.

What a Bankruptcy Chapter 7 Mobile AL Does for You

Once a Chapter 7 bankruptcy is approved, all the debts listed will be discharged. Having debt discharged means that the person doesn’t have to pay the rest of it back ever again, and debt collectors are no longer allowed to try and collect what was owed. This type gives a person a new financial start.

To pursue Chapter 7, you’ll need to file several papers with the courts and serve the final filing paperwork to each person to who you owe money. After some time, you’ll have a bankruptcy hearing where the court will approve or deny your request. Working with a bankruptcy attorney in Mobile, AL, strongly reduces your chances of having your request denied by the court.

This type of bankruptcy usually does not discharge past-due child support, taxes owed, or student loans. You may or may keep your home or vehicles if you have any. To qualify, there are a couple of different types of tests the government now makes you go through to see if you are eligible for this type of debt discharge. A Mobile, AL, bankruptcy attorney can provide you with these tests. If you do not pass these tests, you’ll need to file for Chapter 13 bankruptcy.

What a Bankruptcy Chapter 13 Mobile AL Does for You

If you need to file for Chapter 13, there will be even more paperwork for you to file and more tests to take. Chapter 13 bankruptcies require that you pay back the majority or an agreed-upon amount of debt. Some creditors will require you to pay the entire debt balance, including all back late fees, original balance, and accrued interest. Other creditors may waive the late fees and past-due interest and settle for only the original balance.

Once the agreements are finally made, the amount of debt is proposed to the court, and the court will approve or deny your request for protection. While you will have to pay back the debt, the advantage is that you can do so with a monthly payment that you can afford, usually in one lump sum payment to the bankruptcy court. This type of bankruptcy, in most cases, allows you to keep your home and your vehicles and continue with your lives.

What Bankruptcy Does to Your Future Finances

All kinds of bankruptcies will have an extremely negative impact on your credit, potentially for several years. A person will have to start over with their credit file and rebuild the ability to get credit and establish good payment history before getting more credit, similar to when a person was a young adult and just starting out in life. Having a bankruptcy on your credit report can also prevent you from obtaining housing in certain places, jobs, and or may require you to pay the maximum rate of deposits when deposits are required. Many find a bridge out of post-bankruptcy by doing their best to save money for one year while paying on a secured credit line to help rebuild their credit.

How a Bankruptcy Attorney Mobile Alabama Helps

An Alabama bankruptcy lawyer knows about Alabama’s requirements for filing bankruptcy and can fill out your paperwork correctly. They can also shield you from debt collectors who may attempt to overstep their boundaries. If you’re considering filing for bankruptcy, call Loris Law Firm at (251) 432-3100 today for a consultation!