Alabama Bankruptcy Blog

New Book: The Alabama Bankruptcy Book

I have redone my book.  It is now The Alabama Bankruptcy Book.  It still has the Bankruptcy Myths from the prior book, but now has about 20 more pages with Answers to Common Bankruptcy Questions.  The best part is that is FREE to Alabama residents with no strings attached.  Now you can get the info you need to see if bankruptcy will work for you without having to see a lawyer first.  If you would like a copy of the book, click on the Contact Me link on the top left side of this page.  No one will call or bother you.

This book will dispel many myths and answer many questions regarding bankruptcy such as:

• The effects of the Bankruptcy Reform Act (HINT -- Bankruptcy still works)
• What happens to your stuff
• How to save your house or car from foreclosure or repossession?
• How to stop lawsuits, garnishments, and collection calls and letters?
• How you can still file and keep your property under the “new” laws?
• How you can still get credit after you have filed bankruptcy?
• How to wipe out credit card debt, medical bills and other debt?

 Don't believe the myths.  Educate yourself and don't let debt keep you down.

Can a bankruptcy stop my house from being foreclosed on in Alabama?

Yes.  You may be able to save your house from foreclosure by filing a Chapter 13 bankruptcy.  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 can save your house in Alabama 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?

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 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 other bankruptcy or debt related issues please email me.

What does a bankruptcy do?

Here is a brief overview of a bankruptcy.

There may come a point in a person's life, whether its due to health problems, spending problems, employments problems, etc., where a person owes more money than even the tightest budget will allow him to pay.  When this happens and monthly payments begin to be missed, the people and businesses who are owed the money (the creditors) start calling and sending letters.  Eventually, if the creditors are not satisfied, there are foreclosures and repossessions of vehicles and/or lawsuits getting filed which will then lead to judgments, garnishments and liens.

A bankruptcy can stop most of these bad things from happening.  A bankruptcy can immediately stop the phone calls, letters, lawsuits, garnishments, foreclosures, and repossessions.  This is called the Automatic Stay and it "stays" all collection efforts.  A Chapter 7 bankruptcy will wipe out almost all unsecured debt, like credit cards and medical bills.  Most of the time under a Chapter 7 you will be able to keep your house and vehicles if you are current or almost current on those payments and continue to make your payments to those creditors as agreed to in your contract.

A Chapter 13 allows you to create a plan to pay some or all your debt back to the creditors.  A Chapter 13 can stop your house from being foreclosed on or your car from being repossessed by allowing you to pay back your arrearage over time.  It will also protect a house or vehicle in which you may have too much equity under the State of Alabama's exemption laws.  Alabama's exemptions are very low, so this comes in handy frequently.  The amount you pay back is based on your income and expenses and the amount of debt you need or want to pay back over the length of the plan.  Most plans last for five (5) years which is the maximum length of the plan.

So, the bottom line is a bankruptcy can stop collections of debt by creditors, wipe out all or part of your debt, and/or create a plan to pay back some or all of your debt while normally letting you keep the real and personal property you want to keep.

It is not all rosy though.  There are issues that can make filing bankruptcy very tough.  Bankruptcy also has long term effects on your credit.  I will deal with these issues in later posts.