What is the Best Interest in Bankruptcy?

Best Interest is one of the factors that must be met in order to have a chapter 13 plan confirmed or approved by the Bankruptcy Judge.  Best Interest test or liquidity test is found at 11 U.S.C. §1325(a)(4).  This section of the bankruptcy code provides that for a chapter 13 plan to be confirmed the debtor must be paying to allowed unsecured creditors not less than the amount that would be paid on such claims if the debtor had filed a chapter 7 bankruptcy. In a nut shell, are creditors in a chapter 13 getting as much as they would have received in a chapter 7?

Many times an individual cannot file a chapter 7 bankruptcy because they have equity in an asset that cannot be protected or exempt. If the individual filed a chapter 7 the Trustee in bankruptcy would sell the asset to pay creditors. If the individual filing bankruptcy does not want to lose the asset, such as a home or vehicle, then sometimes the individual can propose to pay the amount the chapter 7 Trustee would have received from selling the asset to his unsecured creditors in a chapter 13 in order to keep the asset.  In a chapter 13 the individual has as much as 5 years to pay that amount to their creditors. The comparison between what the debtor is proposing to pay in the chapter 13 and the amount the chapter 7 trustee would have been able to hypothetically pay creditors in a chapter 7 is the best interest or liquidity test.

Be sure when you meet with an attorney at Bond & Botes you have a good idea of what you owe on loans such as houses or vehicles and an idea of what the asset is worth.  Bankruptcy attorneys are not trying to be nosey or intrusive when we ask you for that information. We are simply trying to analyze whether you would lose the asset if you filed a chapter 7 or whether you would be better off filing a chapter 13.

Share This Page

Bond & Botes Law Offices

At Bond & Botes, we now offer full service bankruptcy consultation and filing over the phone or by video from the comfort and safety of your home or office. Please call 1-877-581-3396 or click here to setup your free phone or video consultation.

The lawyers at the Bond & Botes affiliated offices serve clients at offices in Anniston, Birmingham, Mobile, Montgomery, Opelika, Decatur, Huntsville, Florence, Haleyville and Gadsden, Alabama; Vicksburg, Hattiesburg and Jackson, Mississippi. Read our disclaimer here. You can view our Privacy Policy here.

Alabama Offices

Birmingham

2107 5th Avenue North
Age-Herald Building
Birmingham, Alabama 35203
Phone: (205) 802-2200


Shelby County Location
15 Southlake Lane, Ste 140
Birmingham, AL 35244
Phone: (205) 802-2200


Florence Location
121 S. Court Street
Florence, AL 35630
Phone: (256) 760-1010


Huntsville Location
225 Pratt Avenue NE
Huntsville, AL 35801
Phone: (256) 539-9899


Montgomery Location
311 Catoma Street
Montgomery, AL 36104
Phone: (334) 264-3363


Decatur Location
605 Bank Street
Decatur, AL 35601
Phone: (256) 355-2447


Haleyville Location
914 19th St.
Haleyville, AL 35565
Phone: (205) 486-3580


Gadsden Location
430-B Chestnut Street
Gadsden, AL 35901
Phone: (256) 485-0195


Opelika Location
216 South 8th Street
Opelika 36801
Phone: (334) 887-7666


Anniston Location
1302 Noble St #2C
Anniston, AL 36201
Phone: (256) 344-3559


Cullman Location
200 Second Avenue SW
Cullman, AL 35055
Phone: (256) 739-9866


Mississippi Offices

Jackson Location
5760 I-55 North, Ste 100
Jackson, MS 39211
Phone: (601) 353-5000


Hattiesburg Location
607 Corinne St, Ste B8
Hattiesburg, MS 39401
Phone: (601) 264-7200


Vicksburg Location
1212 Farmer Street
Vicksburg, MS 39180
Phone: (601) 353-5000

© 2024 by Bond & Botes Law Offices. All rights reserved. Disclaimer | Privacy Policy