
Drowning in debt?
We help clients everyday who are struggling with debt for various reasons. This can be due to job loss, medical emergencies, underemployment, divorce, and many other causes. Don't stress! You are not alone! and you have options! There are two primary tools available to most clients struggling with debt: Chapter 7 and Chapter 13. Some key differences are outlined below.
Chapter 7
Fresh Start
Chapter 7 is often called a "straight bankruptcy" because a client will receive a full "discharge" of all unsecured debts. Secured loans, such as a car loan, can either be kept, which is called "reaffirmed" or you may return the collateral, called "surrendering" back to the creditor. The entire process only takes roughly 90 days. In the end, a client will be debt free and receive a fresh start, with a clean credit report and an opportunity to rebuild.
Garnishments & Lawsuits
Being sued by a debt collector or already getting your paycheck garnished? A Chapter 7 will stop any garnishment instantly upon filing. Any lawsuits will also be dismissed. In the State of Alabama, a creditor may garnish up to 25% of you paycheck, making it difficult to pay necessary bills. A Chapter 7 can put a stop to this and give instant relief.
Credit Score
Looking to improve your credit score? Credit scores are important for many reasons but one of the most important factors is being able to qualify for lower interest loans. If your credit score is low, you won't get the best rates and the cost of debt, for example on a car loan, will make the car more expensive. A Chapter 7 can clear your credit report and put you on the path to a better credit score.
Debt Collectors
One of the most common reasons clients end up in our office is the constant harassing phone calls, letters, and text messages from debt collectors. Immediately after filing a Chapter 7, the debt collectors must stop all communication with you - giving you instant peace of mind.
Chapter 13
Qualifications
Why file a Chapter 13 instead of a Chapter 7? One reason may simply be because of qualifications. There are several factors which might prevent a debtor from qualifying for a Chapter 7, and a Chapter 13 may be the only available form of relief. However, that is not to say a Chapter 13 cannot be extremely helpful. There are also several reasons a debtor may choose a Chapter 13 instead of a Chapter 7, even if both are available options.
Prevent Foreclosure
If you are behind on your home and facing a potential foreclosure - a Chapter 13 may stop the foreclosure proceedings are give you an opportunity to keep your home. However, you must act FAST. If you wait too long, you may lose this opportunity.
Filing Fee
A Chapter 13 doesn't necessarily cost "less" to file, but you can get filed for less money down if you are in a hurry and time is of the essence. For example, if you are in jeopardy of losing a vehicle to repossession, or about to start getting your paycheck garnished at work.
Reduce Monthly Payments
A Chapter 13 is often called "debt consolidation". Your debt will be calculated, and you will make 1 monthly payment in lieu of paying all your creditors separately. In most cases, this will reduce your total payments each month and save you money.
Credit Score
Having a good credit score can help you not only qualify for loans, but also to get better interest rates - saving you money!