In a Chapter 13 bankruptcy case in Alabama, you may have the option to surrender property to a secured creditor as full payment of your secured claim. This typically applies to secured debts such as a car loan or a mortgage where you're willing to give up the property securing the debt because you can no longer afford it or it's not worth keeping. Here's how this process generally works:
- Assessment of the Secured Debt: Your attorney or the bankruptcy trustee will assess the value of the property securing the debt and compare it to the amount you owe. If the property is worth less than the debt owed (often referred to as being "underwater"), surrendering the property might make sense.
- Surrendering the Property: If you choose to surrender the property, you will no longer be responsible for making payments on the secured debt. The creditor will take possession of the property and sell it to recover as much of the debt as possible.
- Discharge of the Remaining Debt: Any remaining balance on the secured debt that is not covered by the sale of the property is typically treated as an unsecured debt in your Chapter 13 bankruptcy plan. Unsecured debts are often paid a percentage of what you owe, depending on your disposable income and the terms of your repayment plan.
- Completion of the Chapter 13 Plan: You will continue making payments according to your Chapter 13 plan, which may last three to five years. During this time, you'll make payments toward any priority debts, such as taxes and domestic support obligations, as well as toward your unsecured debts.
- Discharge of Remaining Debts: At the end of your Chapter 13 plan, any remaining unsecured debts are typically discharged, meaning you are no longer legally obligated to repay them.
It's important to consult with a bankruptcy attorney who is familiar with the specific laws and procedures in Alabama to fully understand your options and how surrendering property may impact your Chapter 13 bankruptcy case. Bankruptcy laws and procedures can vary by jurisdiction, so it's essential to seek professional guidance tailored to your individual circumstances.