Many of the clients I meet with believe that if they file bankruptcy, they will lose all their stuff, i.e. cars, house, etc. About the same number of clients believe that if they file bankruptcy they can keep the stuff they owe on without paying for it. Neither of these beliefs are true.
First, the great majority of people who file bankruptcy can keep the stuff they want to keep. If you file a Chapter 7 bankruptcy, you must continue to pay for the stuff as per your original agreement with the lender. If you file a Chapter 13, you can pay for the stuff through a plan and many times reduce your interest rate, payments, and sometimes even the balance to be paid back. A Chapter 13 will also take care of payments you have missed prior to filing.
Even though a bankruptcy can sometimes help with payments, you still must pay for most property for which you owe. The most common exception to this rule is for what the bankruptcy law call "non-purchase money security interest in household goods." These are debts where when you borrow money, normally from a finance company, the lender asks you about appliances, furniture, electronics, or tools you already own and lists these items as collateral for the loan. The bankruptcy law allows you to avoid these liens in many circumstances, and thereby keep this type of stuff without having to pay the debt on it.
I am upside down on my car loan and am struggling to make the payment, but I really need my vehicle. Can an Alabama bankruptcy help me?Read Now
Possibly. In a Chapter 13 bankruptcy you can, under certain circumstances, do what is called a cramdown. If you meet the criteria for a cramdown, you are allowed to only pay back the current fair market value of the vehicle, not the total amount owed.
For example, let’s assume you bought a car 2 ½ years ago, financed $25,000.00 and because your credit was not the best, you have a 12% interest rate. Your payments would be about $556.00 per month. You would still owe $14,352.00. Let’s say, per the NADA Used Car Guide you, the vehicle is now worth $8,000.00. By putting the vehicle in your Chapter 13 plan you could (1) extend the loan to 5 years, (2) reduce your interest rate tremendously (plan rates are currently at 5 to 5.25%, (3) in effect reduce your car payment to $152.00 (less than 1/3 the previous payment).
So, what’s the catch? First, you must have had your car loan for at least 910 days, basically 2 ½ years in order to qualify for a cramdown. If you have not had your car for 910 days, you can still lower the interest rate, but not secured principal. Second, by extending the loan through the length of the plan, you may not be able to obtain the title on the vehicle until the end of the 5 year plan. Third, to maintain the benefit of the cramdown, you normally must complete your Chapter 13 plan. If your case is dismissed or you convert to a Chapter 7, some issues may arise. Fourth, your car must be worth less than the amount owed. If your car is worth the amount owed or more, then there is nothing to cramdown; however, you may still be able to lower the interest rate on the remaining amount owed on the loan.
A Chapter 13 bankruptcy may be able to fix many of your cash flow problems. Please educate yourself and do not let yourself continue to struggle for no reason. Order my book by clicking here and/or contact me or another experienced bankruptcy lawyer immediately.
It is a common misconception that once a debt has been charged off by a creditor that the creditor can no longer collect on the debt and the debt just kind of goes away. Unfortunately, that is not the case.
A charge off is actually merely an accounting procedure by the creditor, whether it is a bank, credit card lender, mortgage company, auto loan company, or any other type of creditor. The creditor has at that point decided the account is no longer an asset to the company.
Although the debt being charged off by the creditor is not a defense to having to pay the debt, there may be another defense. Whether the creditor or a collection company for the creditor can collect on the account depends on the statute of limitations. In Alabama the statute of limitations for most debts is either 3 years or 6 years, depending on the type of debt, from the last payment made on the debt. Be careful here, a payment of any type toward the debt could make a debt which has passed the statute of limitations or is about to pass the statute of limitations collectible again for another 3 or 6 years. Many times you may not hear anything about the debt for years, but out of the blue you are sued or begin receiving collection phone calls or letters regarding the debt. This often happens when a debt has been sold or transferred to different collection companies or debt buyers.
If you have been sued on a charged off debt or are being harassed by a creditor or a collection company, a bankruptcy may be your best way to stop it. There may also be other ways to defend against the debt or settle the debt. Please educate yourself and do not let yourself be bullied by these companies. Order my book by clicking here and/or contact an experienced bankruptcy lawyer immediately.
YES. I have been getting a lot of questions about garnishments lately. Both Chapter 7 and Chapter 13 bankruptcy filings in Alabama will stop garnishments. This is accomplished in a two step process. First, we must file your bankruptcy with the bankruptcy court and thereby obtain a case number for your bankruptcy.
Second, in the Court which issued the garnishment (normally your county’s Small Claims Court, District Court, or Circuit Court) we file a Motion to Quash Writ of Garnishment. In this motion we ask the Court that issued the garnishment to enter an order stopping the garnishment and to return to you any money the Court is holding or receives in the future from the garnishment. This means that if we can catch it in time, we may be able to get some of your money back.
Having said this, I would strongly recommend filing a bankruptcy prior to a garnishment going into effect. I say this only because I know a garnishment taking 25% of your wages is not going to leave much to live on, much less enough to save to pay for a bankruptcy.
Please note that a bankruptcy will not stop a garnishment or income withholding order related to child support.
Many people have been convinced that the bankruptcy reforms that went into effect in October of 2005 have made it impossible for most people to file Chapter 7 bankruptcies. Nothing could be further from the truth. Yes, there is now a “Means Test” which was intended to screen out people with “too much income.” But, in my experience almost everyone whom I have counseled with regarding filing a Chapter 7 bankruptcy who could have filed for Chapter 7 bankruptcy before the 2005 reforms still qualify to file a Chapter 7 bankruptcy in Alabama after the reforms. Nationwide studies have confirmed this -- Porter Study Finds Bankruptcy Law Reform Has Hurt the Poor Most and Bankruptcy Reform’s Impact: Where Are All the “Deadbeats”?
How does the “Means Test” work? First you see if you are over or under the median income for a family of your size in Alabama. For a quick check click here. If your household income is under the median income for the same size household in Alabama, then you have passed the “Means Test” and qualify to file a Chapter 7.
If you are over the median income, it DOES NOT mean you are disqualified from filing a Chapter 7 bankruptcy. Most people can still file. There is just more paperwork to do. With the additional paperwork you are allowed to deduct taxes, housing costs, transportation costs, secured debt payments, medical costs, and many other costs. After deducting these costs, most people have very little income that could be used to pay unsecured creditors; and therefore, can file a Chapter 7 bankruptcy.
The bottom line is, if you are having financial problems, do not let the “Means Test” scare you away from seeking good legal advice from a qualified bankruptcy attorney. The qualifications to file a Chapter 7 bankruptcy in Alabama are still fairly low. Despite anything you may have heard, there is a very high chance you can still file a Chapter 7 bankruptcy. And, if you are one of the few who cannot file a Chapter 7, you can probably file a Chapter 13 bankruptcy and still be protected from creditors.
I have been using a Payday Loan company or Check Cashing store and can no longer pay the fee and I know the check(s) will bounce. Can I file bankruptcy on payday loans or check cashing loans? Can I be charged with a crime or go to jail?Read Now
I continue to see more and more clients come in to see me about filing a Chapter 7 or Chapter 13 bankruptcy after being caught up in the payday loan or check cashing trap. It’s an easy lure – quick easy money with no credit check. It is easy for consumers to rationalize that they can pay the money back out of their next paycheck and be caught up. However, far too often the next paycheck is “already spent” as well and you have to “renew” the loan and pay the fee.
The cycle of renewing these loans becomes extremely draining on a person’s finances which were assumedly already teetering on the edge. All it takes is one look at the interest rate on these types of loans to see why. The average “fees” paid on these loans amount to normally between 400% to 720% annual interest rate. The cycle also often leads to obtaining these loans at multiple companies in an effort to “borrow from Peter to pay Paul.” The FTC has issued a Consumer Alert regarding these loans Payday Loans Equal Very Costly Cash.
You can file bankruptcy in Alabama on payday and check cashing loans and these loans are dischargeable. Do not let these companies convince you otherwise. I have had clients who have been told “You cannot file bankruptcy because you signed a form saying you wouldn’t.” This is NOT true (wouldn’t every lender do this if it was).
In addition I have had clients who have been told they would be charged with a crime for writing a bad check. This again is NOT true. The crime of writing a bad check is a form of fraud, i.e. saying you have enough money in the bank to cover the check at the time of writing it. This fraud has to be relied on by the person receiving the check. In the payday and check cashing loan situation, these companies know the check is not good at the time they accept it; therefore, there is no fraud and there is no crime.
Do not let these predatory loans continue to financially and mentally drain you. Obtaining these types of loans is often a sign of other debt problems as well. Make an appointment with an experienced and knowledgeable bankruptcy attorney and see about obtaining a fresh start.
Yes. You may be able to save your house from foreclosure by filing a Chapter 13 bankruptcy in Alabama. A Chapter 13 bankruptcy allows you to put your arrearage (the payments you have missed) in your Chapter 13 plan and pay them back over the term of your plan (usually 5 years). You will have to pay the entire amount of your arrearage back over this period of time. This in effect “catches up” your mortgage payments, keeping the mortgage company from foreclosing.
Other than allowing you to catch up your back payments the bankruptcy court cannot affect the terms of your mortgage. Therefore, beginning the month after you file for bankruptcy you will have to begin making your regular monthly mortgage payments.
This can be difficult since you were already missing payments and now you are to begin making your mortgage payments again plus a payment to the bankruptcy court. This will require some serious budgeting and discipline, but it will be very important for you to make both of these payments. While there may be some ways to prevent foreclosure if you miss payments post-petition (i.e. after your bankruptcy has been filed), it will be difficult. You will also have to maintain your homeowner’s insurance coverage.
To stop the foreclosure your bankruptcy will need to be filed prior to the foreclosure sale. The 2005 amendments to the bankruptcy laws have made the preparation of bankruptcy petitions much more time consuming. I would recommend you see an attorney immediately and not later than 1 week prior to the foreclosure sale.
The bottom line is while it may take some cutting back on other expenses, a Chapter 13 bankruptcy in Alabama can save your house from foreclosure.
Do you have questions or comments regarding this topic? Please email me.
Why can’t I just put my house, car or other property in someone else’s name before I file for bankruptcy?Read Now
Because it would be a huge mistake. The bankruptcy court trustee has the power to avoid such transfers he or she feels were made with the intent to hinder, delay, or defraud creditors. Under the amended bankruptcy laws the trustee can “look back” at least two years, but may “look back” even longer in some circumstances. The trustees for the Northern District of Alabama routinely ask about real property transfers in the past ten years. Do not worry if you have legitimately (that is transferred to a third party and receipt of fair market value) sold a house or vehicle; however, be prepared to present the paperwork for the transaction.
The consequences of getting caught attempting a “fraudulent transfer” can be severe. The trustee’s avoidance of the transfer itself may cause a debtor many new legal problems; including, but not limited to, issues with the person(s) or entity to which the property was transferred and/or possible criminal charges. In addition such a transfer may result in a debtor not receiving a discharge in his or her bankruptcy which means no protection from creditors.
So, what do you do if you have too much equity in your real or personal property? You probably will be able to file a Chapter 13 Bankruptcy. In a Chapter 13 Bankruptcy in Alabama you may pay some or all of this equity into the bankruptcy court in affordable monthly payments over a period of time. While you may have to pay some money into the court, you will still avoid lawsuits, garnishments, repossessions, foreclosures, and have the other protections provided by the bankruptcy laws.
If you have any questions regarding this or Alabama Chapter 13 Bankruptcy filings or other bankruptcy or debt related issues please email me.
I am continuously amazed at the depths some debt collectors will go to in order to scare unwary debtors into making payments they cannot afford at the time. The statement “We will garnish your next paycheck” is probably a lie.
In Alabama in order for a creditor to obtain a writ of garnishment against your employer to withhold money from your paycheck, that creditor must have a judgment against you. In order to have a judgment against you, that creditor must have filed a lawsuit against you and won either after a trial or by default, that is, because you did not file a response.
Normally when this threat is being made, a lawsuit has yet to be filed. How do you know if you have been sued? First, if suit has been filed against you, you should have been served with a Summons and Complaint by either the sheriff’s department of your county or by certified mail. However, if you cannot be found by the creditor, the creditor may have you served by publication, that is, by running a notice in the newspaper in the county of your last known address. If you are still unsure, you may call the clerk of court of your county.
What if I have been sued? See a lawyer immediately. Depending on which court, Small Claims/District or Circuit, you have either 14 or 30 days respectively from the day you were served to file an answer. Filing an answer generally denying the allegations in the lawsuit will prevent the creditor from obtaining a default judgment against you and will lead to your case being set for court after a few months. This will give you time to save money and/or get your bankruptcy filed.
What if I already have a judgment and/or garnishment against me? If you already have a judgment and/or garnishment against you, I would again suggest you see an attorney immediately. You may be able to have the judgment set aside or appealed, but only if you act very quickly. This may also be a good time to take a strong and hard look at bankruptcy. With a bankruptcy you should be able to discharge the judgment prior to garnishment and stop any garnishment that is already in place. Upon filing a bankruptcy, you may even be able to have a portion of any money garnished from your check returned to you.
The bottom line is do not let harassing calls from creditors or debt collectors scare you into giving them money you cannot afford to give them. Many will say anything they think will frighten you. If a debt collector says anything that worries you, make an appointment with an attorney and see what your rights are. It’s probably a good time to take a look at your financial situation anyway.
Please email me with any questions regarding the topic of garnisments or any other bankruptcy or debt related topic.
I am an attorney located in Cullman, AL. I practice extensively in the area of consumer bankruptcy law, that is, I file Chapter 7 and Chapter 13 bankruptcies for individuals. I handle cases all over North Alabama and have helped hundreds of clients through the bankruptcy process., I receive many referrals from former clients and their families and other attorneys. Why? Unlike other firms, I have a local office. If you are from out of town, we have the technology available to keep your traveling to a minimum. Also, unlike many firms, you will meet personally with an attorney, not a paralegal. An attorney will handle your case from start to finish. ,