There comes a point for many Alabama residents when debt gets to a point where it becomes unmanageable. The more that is owed, the worse the effects on the debtor’s credit, which in turn can hinder their ability to obtain financial assistance and even cost them their property. However, there is an option for both individuals and businesses in the state to fight back against greedy creditors and obtain swift and simple debt relief – bankruptcy.
Bankruptcy is a federal process through which debts can either be significantly reduced or eliminated altogether. While there are several bankruptcy chapters, each catering to the type of debt accrued, debtor’s income and whether the debtor in question is a consumer or business, there are two main bankruptcy petitions commonly filed in Alabama: Chapter 7 and Chapter 13.
These chapters vary greatly in both the time it takes to emerge from bankruptcy protection as well as the outcomes that will ensue. If you have considered filing for bankruptcy in Alabama, the following are some general facts regarding Chapter 7 and 13 to help you determine which option is best for your individual financial circumstances.
Often referred to as “liquidation bankruptcy,” Chapter 7 is the most popular chapter of the U.S. Bankruptcy Code because it completely wipes out debt and can be filed by both individuals and corporations. The ideal candidate for Chapter 7 bankruptcy in Alabama will have little property to help facilitate the process and result in less overall stress for the debtor.
In order to determine if you qualify for liquidation bankruptcy in Alabama, a “means test” will be applied, which will examine your average income for the six-month period prior to filing for bankruptcy. If your income is below the median (state average), then you qualify. However, if your income exceeds the average in Alabama, other factors will be reviewed to determine if you are still eligible, including whether you are unable to pay 25% or more of your unsecured debt.
Exemptions: Alabama Bankruptcy Laws allow some properties to be exempt from liquidation. The debtor’s home, personal property such as clothing or heirlooms, pensions, social security benefits, and other wages are usually exempt from creditor seizure in Alabama.
If you do not qualify for Chapter 7 or do not like the idea of having your assets liquidated, Chapter 13 may be the better option for you. Commonly referred to as “reorganization bankruptcy,” Chapter 13 is a popular petition because it allows debts to be paid off through a repayment plan lasting 3-5 years and unlike Chapter 7, DOES NOT call for the liquidation of assets.
Ideal candidates will have significant equity in a home, regular income to cover expenses, less than $360,475 in unsecured debts and less than $1,081,400 in secured debts.
Additionally, Alabama Bankruptcy Laws require the repayment plan to pass three tests:
- The plan must be delivered in good faith
- Unsecured creditors must be paid at least as much as they would have if Chapter 7 bankruptcy had been filed
- All disposable income must be paid into the plan for at least three years
Obtaining Legal Counsel
Filing for bankruptcy protection is not easy, and when creditors on your back, just one small mistake in the petition can lead to an even greater accumulation of debt. Having an experienced Alabama bankruptcy lawyer on your side will help ensure the best outcome for your case unfolds. However, finding a top attorney can be similar to finding a needle in a haystack.
Not to worry though, that’s where we step in to help.
Our site is designed to make finding and retaining legal counsel in your are quick and simple. We feature links to some of the most trusted and experienced bankruptcy lawyers in Alabama who will take care of every aspect of your case and protect your rights. Our attorneys will assist you in completing paperwork accurately, itemizing your income and expenditures, and will ensure that no matter how much you owe, a favorable resolution for your case is attained.
Contact one of our Alabama bankruptcy attorneys today and be one step closer to obtaining financial freedom.