Job Loss, Reduction in Income and Bankruptcy

More often than not people find themselves in financial hardship due to no actions of their own. These hardships can be from unexpected expenses or unexpected loss of income. As we have all experienced, especially during the recent COVID-19 crisis, outside events can place anyone in unexpected situations. I do not think anyone could have predicted the current impact that the pandemic has had on everyone. However, all is not lost if you experience job loss or loss of hours at your job and find yourself unable to pay for debt. You believed that your prior income was sufficient to pay your bills, but you have now realized that isn’t true no matter how hard you try! We can help. The Montgomery, Selma, and Central Alabama bankruptcy attorneys at The Sellers Law Firm can help you. We will review your situation and explain how a possible Chapter 13 consolidation or Chapter 7 bankruptcy may be able to assist you during loss of income.

Income is first used for the necessities of life. Housing, food, clothing, and medical care and treatment all fall under these necessities. Sometimes these necessities are also tied up as debt such as mortgage or rental payments for housing, and necessary medical care. When you add unemployment on top of living expenses and debt then things can become overwhelming. Considering bankruptcy is always an option. The loss of income can be useful in some situations and harmful in others.

A Chapter 13 bankruptcy is often called a reorganization of debt or consolidation plan. That is, you propose to the Bankruptcy Court a method where you make some payments to creditors, through the Chapter 13 trustee, and still have the possibility of having some debt discharged or excused from repayment. Of prime importance in a Chapter 13 is the ability to make monthly payments to the trustee who distributes payments to creditors under a Chapter 13 Plan. The Chapter 13 Plan is a proposal as to what debtors get paid and which ones may be discharged. The Plan is controlled by certain rules such as you can not propose a Plan of less the 3 years nor more than 5 years. Also, the Plan must pay secured creditors such as home loans, and car loans if you want to keep the house or car. With the loss of some income, you may still be able to offer a Plan that would be acceptable to the Court. However, the loss of all income may mean that you cannot propose a Plan that would be acceptable to the Court. This is where unemployment compensation may be used as the necessary income in order to make payments under the Plan. The attorneys at The Sellers Law Firm will be able to advice and guide you through a Plan that may be within the rules of Chapter 13. Call or text us today at 334-LAWYERS (529-9377) or email us at bsellers@sellerslawfirm.com. You may also use the Contact Form on our website! Our phones are answered 24 hours a day, and we can usually meet with you within 24 hours. All consultations are always free!

A Chapter 7 bankruptcy is a completely different kind of bankruptcy from a Chapter 13. Chapter 7 is generally called a liquidation. This means that if you have assets that are not protected under the rules of bankruptcy then those assets may be sold to pay creditors. However, this is very seldom the case because of the use of exemptions. Exemptions are just what they sound like, some properties may be fully protected from seizure and sales and some properties may be protected up to a certain dollar limit. In Alabama 401(k), state retirement and IRS approved retirement savings are fully protected and cannot be used to pay creditors. The good thing with loss of income under a Chapter 7 is that there is an income limit that restricts some people from filing a Chapter 7 bankruptcy. The loss of a job or income will often make a Chapter 7 bankruptcy available and even easier when it might not have been available prior to loss of income. Also, under a Chapter 7 if you have items such as a house or car under a loan, and you are not behind on your payments and you show the ability to continue making payments then you can enter into a reaffirmation agreement with the lender. The reaffirmation agreement simply says that the lender and you agree to continue with your prior lending agreement as if the bankruptcy had never taken place.

While income reduction or the complete loss of a job may seem to be the tip of a financial iceberg there are options under bankruptcy that could keep your financial ship from being sunk. For advice, counsel and support you can reach out to the attorneys at The Sellers Law Firm where we are your Montgomery, Selma, and Central Alabama bankruptcy attorneys.

Being proactive is the best thing that you can do when dealing with financial issues; therefore, we advise everyone that it is best to speak with us now and not when the creditors are about to take your belongings or sue you in court. We have offices in Montgomery, Selma, Grenville, and Troy. Our phone lines answered 24 hours a day, and we can usually meet with you within 24 hours. All consultations are always free! You may call or text us at 334-LAWYERS (529-9377) or use the Contact Form on our website. You may also reach us at bsellers@sellerslawfirm.com. Take control of your debts and creditors before your debts and creditors take control of you. Contact us today for help!