Montgomery, AL Bankruptcy Lawyer

Chapter 7 cases normally take between 3-5 months while Chapter 13 payment plan cases normally take 3-5 years.

To get your bankruptcy case filed and to obtain the legal protection you need, we can normally prepare the case in 3-5 days once we have all the applicable information. We provide our clients a list of what we need, and proceedings can take longer if our clients need more time to gather those items, or if the information we have is incomplete. You can rely on us to guide you in the process. Our bankruptcy attorneys are experienced in assisting our clients to get the information we need.

We have more options in a Chapter 13 bankruptcy if you are behind on your car payment or have a high interest rate. That can make your car more affordable while simultaneously protecting you from other debts. In a Chapter 7 bankruptcy, people can keep their car if they are not behind on car payments and are willing to keep paying the loan they already have. If your car is paid-off, we make sure that it isn’t worth so much money that it would be sold by the Chapter 7 trustee. We assume you don’t want to lose your car. That is why it is very important to rely on our experienced Montgomery bankruptcy attorneys to guide you.

If you file a Chapter 7 bankruptcy, the filing can stay on your credit report for up to 10 years. With Chapter 13, the bankruptcy filing stays on the report for up to seven years. As long as the bankruptcy stays on your credit report, it may limit your ability to receive credit, or the interest rates you may pay.

Conventional wisdom is that bankruptcy will severely lower credit scores. That does not appear to be true. Bankruptcy reduces one’s debt-to-income ratio which is a major factor in scoring credit.

The company we use to pull credit reports gives us an average score for our client at the time of filing. The company also provides a prediction of what the score might be one year after bankruptcy. Even though it is an estimate, we find it to be fairly accurate given the feedback we get from our clients. People with excellent credit before their bankruptcy will see some decrease within a year but not as much as one might think.

For example, if your score is 740 before bankruptcy, it may reduce only to 680 after it. This new rating is still good enough to get a good interest rate on a car or a house. If you have poor credit before your bankruptcy, you will normally see an increase in your credit score within a year. For example, you may start with 500 and have a credit rating of 625 one year after your bankruptcy. If you have an average credit score prior to bankruptcy, you will typically still have an average credit within a year. For example, you may start at 640 and go down only to 630.

Credit scoring and estimations of those scores are very complex so there is no “rule of thumb” that will guarantee you will have better or worse credit after your bankruptcy. However, logical financial decisions made by lenders can provide some insight. Who would you rather loan money: someone who has no debts or someone about to get their wages garnished at work to pay creditors? The assumption that bankruptcy means you’ll have bad credit simply is not always correct.

There are limits to how much property you can protect in bankruptcy. That protected property is called an “exemption.” If you go over those limits, it can affect how much you must pay in a Chapter 13 payment plan. However, no one will take your property.

Retirement accounts in a “qualified trust” such as an IRA or a 401(K) are 100% protected from your creditors while you are in the bankruptcy process, as long as the money stays in that account. Clothing, books, pictures, and portraits are also 100% exempt in Alabama.

Alabama has a “Wildcard” exemption of $8,225 per person (as of 2021), and it can be applied to savings and checking accounts. However, that exemption can be used for other property, including household goods and equity in vehicles. Most clients choose to apply the exemption to cover these items instead of their savings or checking accounts. Those clients who prefer Chapter 13 choose that type of bankruptcy because they can keep their property by just paying more on their plan payments. Our bankruptcy attorney in Montgomery will help review your property limits, so you can decide if Chapter 13 is the best choice for you, particularly if you want to keep your property.

Extra money received during a Chapter 13 plan must be paid to your creditors by paying it to the Chapter 13 Trustee. In Alabama, an inheritance or gambling winnings are considered “disposable income.” We advise against gambling while you are in Chapter 13 bankruptcy because if you lose money, you lose it to the Casino and if you win money, you lose it to the Trustee. While a big windfall at the Casino could mean you can pay your creditors in full, you may find that the deal we obtain for you in Chapter 13 leaves you in a better financial position.