What Happens in a Chapter 13 Bankruptcy Case in Alabama?

When debt becomes overwhelming, many Alabama residents turn to Chapter 13 bankruptcy as a way to regain control of their finances without losing their property. Unlike Chapter 7, Chapter 13 allows you to reorganize your debts into a manageable repayment plan while receiving powerful legal protection.

In this article, we’ll walk through what happens in a Chapter 13 bankruptcy case—step by step, so you know exactly what to expect and how this process can help you move toward financial stability and peace of mind.

Step 1: Filing Your Case and the Automatic Stay

The moment your Chapter 13 bankruptcy case is filed, the court issues an automatic stay. This is one of the most immediate and powerful benefits of bankruptcy.

The automatic stay:

• Stops foreclosure proceedings
• Halts repossessions
• Ends wage garnishments
• Puts an end to collection calls and lawsuits

This legal protection gives you breathing room while your case moves forward.

Example:James, a Birmingham homeowner, was three months behind on his mortgage and facing foreclosure. Once his Chapter 13 case was filed, the foreclosure was immediately stopped, giving him time to catch up on missed payments through his repayment plan.

Step 2: Creating the Chapter 13 Repayment Plan

After filing, your attorney proposes a 3- to 5-year repayment plan tailored to your financial situation. This plan is based on:

• Your household income
• Necessary living expenses
• The type and amount of debt you owe

Instead of juggling multiple bills, you make one monthly payment to the Chapter 13 trustee—often significantly lower than what you were paying before.

This structured approach allows many filers to:

• Catch up on mortgage or car payments
• Pay priority debts like taxes or child support
• Reduce or eliminate certain unsecured debts

Step 3: Trustee Review and Confirmation Hearing

Once your repayment plan is submitted, a Chapter 13 trustee reviews it to ensure it meets legal requirements. If adjustments are needed, your attorney negotiates on your behalf.

Next, the court holds a confirmation hearing, where a judge officially approves the plan. Once confirmed, the plan becomes legally binding, and creditors must follow its terms.

Step 4: Making Payments and Staying Protected

After confirmation, you continue making your monthly payments as outlined in your plan. As long as you stay current:

• Creditors cannot sue you
• Property cannot be repossessed
• Foreclosure remains on hold

This phase is about consistency and stability. Many clients find relief in knowing there’s a clear path forward and a predictable payment schedule.

Step 5: Completing the Plan and Receiving a Discharge

Once you successfully complete all required payments, the court issues a discharge. This means your remaining qualifying unsecured debts are legally eliminated.

At this point, you:

• Exit bankruptcy in good standing
• Are current on secured debts like mortgages or auto loans
• Can begin rebuilding your financial future

Chapter 13 isn’t just about repayment—it’s about long-term financial recovery.

A Path to Protection and Peace of Mind

Chapter 13 bankruptcy offers more than a payment plan. It provides structure, protection, and a clear roadmap toward financial stability. For many Alabama families, it’s the solution that makes staying in their home, keeping their vehicle, and regaining peace of mind possible.

If you’re considering Chapter 13 bankruptcy, Alabama Bankruptcy Relief Center can guide you through every step of the process. Contact us today for a free case evaluation at 205-860-7708 or use the contact form below, and learn whether Chapter 13 is the right solution for you.