Saving Expenses Through Bankruptcy
There are many reasons to file bankruptcy. You may have gotten behind on rent and mortgage payments and need an alternative to being forced to pay all you owe at one time or to move from your home. A creditor may have taken control of your finances by garnishing your wages or you may find yourself in the situation that your expenses are greater than your income. The last issue is the one that we want to look at here. Would it not be to your advantage if you could reduce the cost of paying for a high interest loan to a more reasonable interest rate or to extend the payments for additional time so that you could have a more reasonable payment. If you find yourself overwhelmed with the cost paying for a necessary item, such as a reliable car, then you may want to consider consulting with your Montgomery, Selma, and Central Alabama area bankruptcy attorneys at The Sellers Law Firm.
Filing a bankruptcy to reduce secured debt expenses can be done in a number of ways. First if you purchased the secured item such as a car more than 910 days prior to filing a Chapter 13 bankruptcy then can do a cramdown. A cramdown is simply paying to the secured creditor the actual value of the security rather than the amount owed through Chapter 13 monthly payments to the trustee. The trustee then distributes the funds to the creditor. Any amount left owing to the creditor at the end of the payments will then be treated the same as any other unsecured creditor such a credit card or personal loan debt.
A second way you can reduce your outgoing monthly expenses, while keeping your secured items is by reducing the interest rate to the creditor. This is allowed because the bankruptcy code restricts the amount of interest a creditor can collect to a formula that is based on the prime rate plus, some additional amount of interest based upon the stability of your income. For example, if you are paying 28% interest on a $20,000 loan for 6 years then you will be paying over $21,000 in interest with a payment of about $577 a month. If you file a chapter 13 bankruptcy and have stable employment and the prime interest rate is 4.5% then the chapter 13 will allow you to reduce the interest paid to your creditor to $2,372 and a monthly payment amount of $373 to the creditor through the trustee. This saves outgoing monthly expenses by over $200. But you must be aware that there are other expenses associated with the Chapter 13 payment that are paid through the monthly payments to the trustee. First the trustee collects a fee for their services, the Court’s filing fee is generally paid through the monthly payment as is the attorney fee. However, if you consult with your Montgomery, Selma, and Central Alabama area bankruptcy attorneys at The Sellers Law Firm we will be more than happy to show you all the possibilities that would be available under a Chapter 13 reorganization plan. If you are ready to move forward, call or text us at 334-LAWYERS (529-9377). You may also use the Contact Form on our website. All consultations are free! Our phone lines are answered 24 hours a day, and we have offices located in Montgomery, Selma, Greenville, and Troy. Call us now to get started!
The Chapter 13 plan has a couple of advantages other than reducing the amount you must pay to the creditor as well. Since you can only be in a Chapter 13 bankruptcy for 3 to 5 years the above example would reduce the amount of time that it would take for you to pay for your car. There is also one other major consideration that I like to discuss with client when considering a chapter 13 as opposed to a Chapter 7 bankruptcy. While a Chapter 7 bankruptcy usually only lasts about 6 to 9 months once you have completed the process then you could be stuck with no alternatives if you find yourself in financial difficulty again for a certain time after you complete the Chapter 7 bankruptcy. Since you are in a Chapter 13 from 3 to 5 years then you have some ability to adjust the bankruptcy situation to your changed financial circumstance. The most common situation is if the car you are paying for in the bankruptcy stops working. Then, according to your situation you may be able to convert to a chapter 7 and surrender the car then be free to purchase another one.
Please remember that there are situations where you can reduce your outgoing monthly expenses through a chapter 13 bankruptcy but these situations do not apply to everyone considering bankruptcy, but the experienced attorneys at The Sellers Law Firm in the Montgomery, Selma and Central Alabama area will be able to guide you through all the options.
At The Sellers Law Firm, we are here to help you. We have offices located in Montgomery, Selma, Greenville, and Troy. Our phone lines are answered 24 hours a day! All consultations are free, and we can usually see you within 24 hours or sooner. You can call or text us at 334- LAWYERS (529-9377). You may also use the Contact Form on our website. Of course, you can also contact us at firstname.lastname@example.org. Remember that doing nothing changes nothing so, contact us now to get started!
The Sellers Law Firm is designated a debt relief agency by an Act of Congress and the President of the United States. We have proudly assisted people seeking relief under the U.S. Bankruptcy Code for four decades.