John, Why Don’t You File Chapter 13 Bankruptcies in Birmingham, Alabama?
As you may know from reading our materials that we have offline (books, reports, etc.) and online (web sites, blogs and videos), then you’ll know that while our focus is on suing abusive debt collectors and mortgage companies, we in the past would file a small number of Chapter 7 bankruptcies but we will not file Chapter 13 bankruptcies in Birmingham, Alabama.
While this is not a decision set in stone, at the time of this writing we have no intention of changing that practice and sometimes people (both consumers and lawyers) are curious about this.
So I wanted to explain why we don’t file Chapter 13 bankruptcies.
The primary reason is that we feel that it is very rarely in your best interests to file a Chapter 13 bankruptcy. There are certainly exceptions. There are times when it is appropriate to file a Chapter 13 but for most people we do not feel that it is your best choice.
Just to review, Chapter 13 is a type of bankruptcy where you are paying all or a portion of your debts over a three to five-year period.
This includes unsecured debts such as medical bills and credit card bills as well as payday loans and cash advances.
The problem is that this keeps a bankruptcy on your record for quite some time and it also has you not only paying your normal debts such as your house payment or your car payment, but it also has you paying an additional amount for the back payments or the arrearage.
For most people, but certainly not all, who have fallen behind and who are looking at Chapter 13, it is very difficult for them to be able to make their normal payments on their secured debt (cars, mortgages, etc.) and to pay an additional amount toward the secured debt arrearage, and to pay some portion of their unsecured debt.
What we have seen over the years of representing consumers is that a very, very low percentage of people actually complete their Chapter 13 plan. Most people, unfortunately, will stay in a Chapter 13 for several months or maybe a year or two and then they are dismissed from bankruptcy.
They do not receive a discharge of their debts.
Instead, they receive a dismissal which means that they now owe the same debt all over again plus they have a bankruptcy on their record. But they don’t have any benefit of a discharge order.
Again, for some people, filing a Chapter 13 may be the right approach, but in our opinion for most people they end up worse off than they started and the only thing that they have bought is perhaps a little bit of time on putting off a foreclosure. There are other ways to delay a foreclosure (or stop it permanently) when your mortgage company is doing something wrong which is quite common these days.
One of the benefits of filing bankruptcy is to stop the bleeding. Stop any further damage to your credit report by continuing to be late every month. Now certainly a bankruptcy filing will affect you because that is a negative event, but for most people there is eventually, and sometimes quicker than might be expected, an improvement in their credit report because there is no debt anymore (the debt that has been discharged) and they are not continuing to receive updated late reports from their creditors and debt collectors. It also stops lawsuits which can have a damaging impact on your credit report if there’s a judgment entered against you.
I will say this about bankruptcy and specifically Chapter 13 bankruptcy. We have recommended to a select number of clients that they file a Chapter 13 bankruptcy or at least sit down and talk with a lawyer who focuses on Chapter 13 bankruptcies. That is not what we do and unless we receive information that changes our opinion, this is not what we’re planning on doing, but there are certainly times when Chapter 13 makes sense. We also will get involved with bankruptcy lawyers whose clients, whether in Chapter 13 or Chapter 7, have litigation issues. We enjoy suing abusive debt collectors, car finance companies, mortgage companies, etc. who break the laws and this is true of those that break the automatic stay and the discharge orders.
So I hope that this discussion of why we do not file Chapter 13 bankruptcies answers your questions about this and we do not want to discourage anyone from considering a Chapter 13. Instead, we want to encourage you to make sure that you carefully consider the consequences of filing a Chapter 13, the likelihood of you completing the three-to-five-year plan, and whether a Chapter 13 meets your objective.