What Are the Advantages of Filing a Chapter Seven (7) Bankruptcy in Birmingham, Alabama?
For most consumers, we feel that a chapter 7 bankruptcy is better than filing a chapter 13 bankruptcy. We want to share a few reasons why we feel this way by answering questions that are often asked.
What is the difference in a chapter 7 bankruptcy and a chapter 13 bankruptcy?
A chapter 7 bankruptcy is referred to sometimes as “straight bankruptcy” while a chapter 13 is often called “debtor’s court.”
The basic concept of each is fairly simple.
A chapter 7 bankruptcy does not have you make any payments into court. You simply pay the filing fee, a credit counseling fee, and then pay your lawyer’s fee. No payments are made after that to the creditors, unless you are going to keep the property (house, car, etc).
In a chapter 13 bankruptcy, you make payments into court over a 3 to 5 year period.
What is one advantage of a chapter 7 bankruptcy over a chapter 13?
One advantage is simply the speed that the bankruptcy is over.
In a chapter 7 in Birmingham, Alabama, you normally will be done with the bankruptcy and have your debts discharged about 90-120 days after filing.
A chapter 13 will take 3-5 years.
Why does speed matter?
All other things being equal, it is normally better to get into and then out of bankruptcy court as quickly as possible. The whole idea of bankruptcy is to get a “fresh start” so why delay that 3-5 years?
The sooner you get out of bankruptcy, the sooner you can get on with your life.
You also won’t have payments of 3-5 years hanging over you which often cause Alabama consumers to not be able to stay in a chapter 13 bankruptcy.
Why can’t most people who start a chapter 13 stay in it?
The problem is you must not only make your payments into court but you must also continue to pay your mortgage, car payments, etc.
It is quite common for something to come up and the payments can’t be made into court. So eventually, sooner or later, most people do not stay in the chapter 13 but instead are “dismissed” from the case.
What’s the problem with being dismissed?
There is not a discharge of the debts. You filed for bankruptcy and will pay the price for that on your credit reports, having to answer “Yes” when asked “Have you ever filed for bankruptcy” but you don’t get the benefit of having your debts discharged.
Is a chapter 13 bankruptcy ever better than a chapter 7?
Yes. There are certain situations where all you need is time. Time to reorganize certain debts. Time to get caught up. You may have been out of work and fallen behind but now you are back at work and can pay your normal bills and you can pay into court on the back debt or “arrearage” that you owe.
You may have too much equity in your house to do a chapter 7.
There are situations where it is better to file a chapter 13 than a chapter 7 but for many people, who qualify (not everyone can qualify for a chapter 7), it is faster and better to file a chapter 7.
If you live in the Birmingham area of Alabama and want to talk with us about your situation and what chapter of bankruptcy is best for you (if bankruptcy is even the best option), then pick up the phone and call us at 205-879-2447 or fill out our contact form on our website and we’ll get right back with you.