The Discharge in Bankruptcy

There are good times and bad times, thankfully there can be assistance in bad times especially if financial difficulties are causing some of the bad times. While bankruptcy may not be the cure for all that ails you sometimes it can offer relief from financial difficulties especially if you are seeking to have some personal consumer debt permanently excused or discharged. To see if bankruptcy may be a route to a fresh start you can consult with the Montgomery bankruptcy attorneys or Selma bankruptcy attorneys at The Sellers Law Firm.

First and foremost, the filing of a bankruptcy brings the automatic stay in to place. The automatic stay stops any attempt by a creditor to collect a debt while you are in bankruptcy. This means no more harassing phone calls, letters, lawsuits, repossession, foreclosures, and garnishments. To some extent you could say that a bankruptcy discharge is a continuation of the automatic stay for certain consumer debt forever into the future. However, there are, as always, limitations to a discharge. The most important one is that someone that has debt for a secured item such as a car, financed furniture or furnishings, or a mortgaged property cannot have the debt discharged for those items and then keep the items. This is why your car title will have the lenders name on the title or the mortgage is recorded in the probate office in the county where the land securing the loan is located. These are called perfected liens and puts any potential buyer of the item on notice that these items cannot be sold without paying the creditor and of course if the creditor is not paid then they have the right to repossess a vehicle, other security, or foreclose on real property.

Two other limitations to a discharge in a Chapter 7 and Chapter 13 bankruptcy is excess income or excess equity in real or personal property. By excess income we mean what is known as the means test. To determine excess income, you must show that you do not have the ability to pay some or all of your Dischargeable debt. This is done by taking your last six months of income and using that information to calculate an average annual income. Then the average annual income is compared to an amount that is calculated based upon where you live and how many persons are in your household. For a household of one in Alabama if your calculated average annual exceeds $49,798 (as of 2021) then you may be able to pay some or all of your dischargeable debt. There is a secondary test that must be done if you exceed the average annual income. This secondary test may then confirm your ability to pay some dischargeable debt or allow you to have some debt discharge. The means test is one of the more complicated elements filing a bankruptcy and one that I would recommend that you use a knowledgeable bankruptcy attorney such as those at The Sellers Law Firm which has offices in the Montgomery, Selma, Greenville, and Troy. Give us a call now or text us at 334-529-9377 . You may also email us at bankruptcy@sellerslawfirm.com or use the Contact form on our website. We are here and ready to help you now. Remember that all consultations are free and we can come up with a strategy to help you! Our phone lines are answered 24 hours a day!

The other major limitation is that you cannot have excessive assets that a creditor would normally have access to in order to enforce a debt. The protected values of these assets are based upon the type of property. For instance, the current protected amount for personal property is $8,225. Personal property includes furniture and furnishings, clothing, hobby and sporting equipment, cars, and other vehicles, checking and savings accounts, electronics, and most small personal items. As an example, if your personal assets value at $10,000 then your creditors would have access to $1,775 worth of value and you would either need to pay your creditors the excess value or turn the items over to the trustee to be sold and then have the creditors paid that amount.

Remember that these are just two of the limitations to discharge there are also specialized types of debt that may not be dischargeable including child support, fines and court costs for criminal activity, student loans, and back taxes. If the means test and the equity test do not limit your discharge and you are not seeking to discharge specialized debt, then there is a wide range of debt that can be discharged. Dischargeable debt includes but may not be limited to credit card, medical, personal loan, deficiency amounts on repossessed vehicles and foreclosed property, prior utility service, and civil judgments for nonintentional acts such as auto accidents. So, while the discharge in bankruptcy can help you get out of a tough financial situation there are limitations to debt discharge and counseling with a knowledgeable Montgomery bankruptcy attorney or Selma bankruptcy attorney such as those at The Sellers Law Firm should be your first stop.

The Sellers Law Firm has four offices conveniently located throughout Central Alabama. We are located in Montgomery, Selma, Greenville, and Troy. All consultations are free, and our phone lines are answered 24 hours a day. We can usually meet with you within 24 hours! When you meet with us, we will develop a strategy plan to help you overcome any financial issues that you may be having. Our team is here to help you with Chapter 13 and Chapter 7 bankruptcies. You may reach us by calling or texting us at 334-LAWYERS (529-9377). You may also email us at bsellers@sellerslawfirm.com or by using the Contact Form on our website. Remember that doing nothing changes nothing so contact us today for immediate assistance!