Why would someone file for Chapter 13 bankruptcy? The best way to answer this question is to start with a basic understanding of your debt settlement options. In Alabama, the two most common chapters of bankruptcy that individuals, married couples, and families use to settle their debts are Chapters 7 and 13. Put simply:

  • Chapter 7 bankruptcy allows you to eliminate most of your debts completely by liquidating your assets and property. However, it has limitations on the types of taxes and debts it can cover.
  • Chapter 13 bankruptcy allows you to hold on to your assets and property by establishing realistic payment plans for the things you want to keep, such as your home and your car.

There are a lot of reasons to file for Chapter 13 bankruptcy, but most often, people choose to pursue this route when the liquidation aspect of Chapter 7 doesn't satisfy their goals, or when they're determined to hold on to their house and/or other properties.

A note on Chapter 13 payment plans: If Chapter 13 bankruptcy sounds like something you might be interested in pursuing, you're probably curious as to how much you'd have to pay each month. Well, that depends. Really what it comes down to is how much you can afford to pay.

For instance, at my law firm, we start by looking at your income and monthly living expenses. When I say "living expenses," I don't mean your bills, credit cards, or car payments, but your basic necessities like food, gas, clothing, and shelter.

Once we know how much you have coming in each month and how much it's costing you just to live and get by, we know that what you have leftover is what you have available for your Chapter 13 payment plan. From there, we would ask the courts if you can send that amount to them each month so that they can divide it up between the creditors you owe. With this system, the creditors get paid a little bit each month rather than you having to try and pay everything off all at once.

For more details on Chapter 13, I encourage you to contact my law firm Jeffrey B. Irby, P.C. Being a bankruptcy lawyer in Huntsville, I'm happy to offer my services to individuals, couples, and families throughout northern Alabama. Schedule your free consultation today.