FAQs

Bankruptcy FAQs

What is Bankruptcy? Bankruptcy is a legal proceeding where an individual or business debtor eliminates some or all of their debt.

What is the difference between Bankruptcy and Debtor’s Court? Debtor’s Court is the common name for Chapter 13 bankruptcy.  When someone refers to bankruptcy, they usually are talking about Chapter 7 bankruptcy.  In Chapter 13-Debtor’s Court a debtor can consolidate debt and pay back some or all of the debt over a three to five year period.  In Chapter 7 Bankruptcy a debtor can discharge (erase) some or all debts.

Will filing Bankruptcy or Debtor’s Court stop a foreclosure sale? Yes, the filing of a Chapter 7 Bankruptcy case or Chapter 13 Debtor’s Court case will, in most cases, stop a foreclosure sale, but in order to save your home from foreclosure AND create a plan to catch up on past due mortgage payments, Chapter 13 – Debtor’s Court correct option.

If I file Bankruptcy, will I lose all my property? Most people who file bankruptcy, do NOT lose their personal property, because that property falls under certain bankruptcy “exemptions” (stuff you can keep when you file bankruptcy).

If I have lots of equity in my home (over $30,000.00) can I file Chapter 7 Bankruptcy and keep my home? In Alabama, if you have too much equity in your home, the Bankruptcy Trustee can sell your home and distribute the money to your creditors.  The homestead exemption in Alabama in $5,000 for individual debtors and $10,000 for  a married couple filing jointly.  What does this mean?  It means, that if you have over $20,000 of equity in your home, you need to discuss with a Bankruptcy Attorney whether you should file Bankruptcy, and if you do, what the chances are that the Bankruptcy Trustee will sell your home.

Will I lose my car if I file Bankruptcy? Most people who file bankruptcy do NOT lose their car because they either owe money on the car, or the car is not worth the Bankruptcy Trustee’s time and effort to sell.  It’s important to talk to your Bankruptcy Attorney about ALL your vehicles, how much they are worth and how much you owe on them.

Should I file Chapter 7 Bankruptcy or Chapter 13 Debtor’s Court?  If you are overwhelmed by debt and have little or no hope of “digging out” (based on your income/salary), then Chapter 7 Bankruptcy may be your best option.  If you are behind on your bills, but think you could “get back on track” if your debtors didn’t want all the money NOW, then Chapter 13 Debtor’s Court is likely best for you.

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