People file for bankruptcy for a variety of reasons. The most common reasons include heavy debt, losing one’s job, divorce, home foreclosure, or serious illness.
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In fact, the average credit card debt in Alabama is a whopping $5,237 per person. In addition, foreclosure rates are also as staggering, one out of every 1,955 AL homes is currently in foreclosure.
If you have found yourself in similar situations, then you are more than likely facing other personal problems that come with dealing with debt. The fear of losing your automobile , house or your income can drain a person physically and emotionally. You may have even considered Declaring Bankruptcy .
If you are thinking “Is Bankruptcy Best For Me?” you are certainly not alone. Close to a million people file bankruptcy each year in the US. Bankruptcy is a device provided by the US Government to help struggling Americans find relief from massive debt. You may want to research bankruptcy if it’s best for you.
What Is Bankruptcy?
Bankruptcy offers people the time to get out from underneath considerable debt while still working with lenders in a legal capacity. It is started by a person filing a Petition with their nearest bankruptcy court. The Petition can be filed by an individual or married couples jointly. When the bankruptcy is finished, the filer will ‘exit’ and will have a chance for a fresh start on their finances.
Throughout the bankruptcy, a trustee is appointed to oversee the particulars of the case. His or her responsibilities will vary and depend on whether the individual has filed for Chapter 13 or Chapter 7 bankruptcy.
Did you know that Alabama ranks #3 in the nation for bankruptcy filings. In 2017 the number of personal bankruptcies was approximately 519 out of every 100,000 residents.
What Is The Difference Between Chapter 7 And Chapter 13?
People in Alabama, who claim bankruptcy, will elect to file under Chapter 13 or Chapter 7 of the U.S. Bankruptcy Code. Want to know the difference? Take a look at the descriptions below for more information:
In exchange for dissolving all past due debts, the trustee of the bankruptcy will liquidate the assets, such as cars, homes, and other property of value in a Chapter 7 Bankruptcy proceeding.
Debtors that were listed on the bankruptcy filing will be repayed with the proceeds collected during liquidation
A Chapter 13 Bankruptcy plan is reserved for people who have the means to pay some of their debts through a restructuring. The individual will be allowed to keep his or her valuable assets over a 3- to 5-year time frame.
In order to determine which chapter a person can file, he or she will have to assess their ability to repay under the Bankruptcy Means Test.
What Is A Bankruptcy Means Test?
The goal of the Bankruptcy Means Test is to determine who is eligible to apply for debt forgiveness through a Chapter 7 Bankruptcy. It considers your:
- income and expenses
- household size and composition
- debt-to-income ratio
For those who do not qualify for a Chapter 7 filing, he or she will be able to file for Chapter 13, as described above.
What Are Bankruptcy Exemptions?
Specific states have certain exclusions that are enacted by congress as federal bankruptcy exemptions for filers. These exemptions will determine what you are able to retain throughout and after Chapter 7. In a Chapter 13 situation, the exemptions will determine what amount you will have to pay certain financial institutions in your repayment plan.
Unless otherwise noted, all law references are to the Alabama Code.
- Real property or mobile home, up to $15,500. Property can’t exceed 160 acres.
- Before an attempt to sell the home, a homestead declaration must be recorded.
- A burial place and a church pew or seat.
- Clothing, books, family portraits and pictures.
- For consumer loans, leases, and credit sales: 75% of weekly net income or 30 times the federal minimum hourly wage. For other cases: 75% of earned but unpaid wages. The judge may approve more for low-income debtors.
- Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).
- IRAS and Roth IRAs to $1,283,025.
- IRAs, Roth IRAs and other retirement accounts.
- Judges (for payments being received only).
- With certain exceptions, spendthrift trusts.
- Law enforcement officers.
- State employees.
- Crime victims’ compensation.
- Unemployment compensation.
- Workers’ compensation:
- Southeast Asian War POW’s benefits.
- Aid to blind, aged, and disabled; other public assistance, including earned income tax credit (In re James, 406 F.3d 1340 (11th Cir. 2005)).
Tools of Trade
- Arms, uniforms, and equipment required to be kept by state military personnel.
- Life insurance proceeds.
- Disability proceeds up to an average of $250 per month.
- Annuity proceeds up to $250 per month.
- Life insurance. proceeds and 100% cash value.
- Life insurance, if policy prohibits use to pay creditors.
- Mutual aid association benefits.
- Fraternal benefit society benefits.
- $7,750 any personal property (except wages).
Want to know if you can include Student Loans in Bankruptcy or Medical Bills in Bankruptcy? Check out our Bankruptcy FAQ’s section.
Filing Bankruptcy Alone vs. Filing With An Attorney
Current bankruptcy laws do not require filers to hire a lawyer to declare bankruptcy relief.. People are allowed to represent him or herself as a pro se debtor. You will simply contact the local bankruptcy court and obtain all forms and requirements directly through them. Going it alone is not an easy task.
Filing Bankruptcy without an Attorney
A basic Chapter 7 filing that doesn’t have a lot of debtors or assets may be easy to manage on your own.
A basic bankruptcy that doesn’t involve an attorney might look like:.
- Your income is below the state median;
- You have no property;
- Your debts will be considered dis-chargeable.
Working With An Attorney
Most of the time, it is usually in one’s best interest to work with a bankruptcy lawyer. A bankruptcy lawyer is there to represent you and not the creditors.
An attorney is also keenly familiar with exemption laws. In addition, they can come up with creative strategies to keep your assets through practical repayment strategies that are fair to everyone involved.
While you may have the fight and ability to manage a Bankruptcy on your own, it tends to make things a lot easier on an already stressful situation, especially when there is so much at stake.
What Does Bankruptcy Include?
Once you file for bankruptcy in AL, the courts put in place an order called an Automatic Stay. This order will stop debt collection calls, wage garnishments, and additional claims. Keep in mind that payments regarding child support and criminal cases will still need to be made during this time.
In any event, Bankruptcy will be able to include:
- credit card debt
- protection from eviction
- avoidance of foreclosure
- utility bills
- medical expenses
Again, unless you are filing a complex Chapter 13 case, you will lose all assets associated with a Chapter 7 Bankruptcy protection. You will, however, be able to prevent any and all collections from occurring as long as they were incurred before the date of filing and discharge.
Final Thoughts And Considerations On Filing For Bankruptcy In Alabama
As you can see, there a lot of information associated with successfully filing for bankruptcy and then exiting it unscathed or satisfied. Only a licensed bankruptcy attorney can guide you through this arduous process, particularly when it comes to complex cases. Be sure to hire someone you respect and trust.
Bankruptcy Courts In AlabamaFrank M. Johnson, Jr. United States Courthouse
One Church Street
Alabama Middle Bankruptcy Court
John A. Campbell United States Courthouse
113 St. Joseph Street
Alabama Southern Bankruptcy Administrator
United State Bankruptcy Court
201 St. Louis Street
Alabama Southern Bankruptcy Court
Additional Alabama Resources
Foreclosure Help Program
Disability SSDI Benefits