Filing personal or business bankruptcy in the state of Alabama can prove beneficial, as well as detrimental, pending the unique circumstances of the potential bankruptcy case at hand. While bankruptcy may offer relief, some protection, and alleviate some outstanding debts, the recent updates to bankruptcy laws make discharging a number of debts impossible, among other considerations. Deciding whether to file for Bankruptcy in Alabama is right for your specific situation requires in depth research, consultation, and objective analysis of your existing financial outlook.
Alabama Bankruptcy Topics
- Personal Bankruptcy Options in Alabama
- Keep Your Home: Bankruptcy and Foreclosure
- Alabama Bankruptcy Exemptions (Exempt Assets)
- Options for Filing Bankruptcy
- Local Bankruptcy Courts and Trustees
The majority of individuals, if opting to declare bankruptcy will file under Chapter 7 or Chapter 13 of U.S. Code Title 11, which is otherwise known as Bankruptcy Code.
- Chapter 7 Bankruptcy is often referred to as ‘liquidation’ bankruptcy, because the debtor’s assets are literally, in a financial sense, liquidated, along with applicable outstanding liens and debt obligations. To prevent bankruptcy abuse, filing Chapter 7 requires individuals to take a “means test”, which determines if an individual’s income is below the median amount in the state of Alabama and if given the level of outstanding debts, repayment via Chapter 13 or other arrangements is feasible. In Alabama, the median income figure used is $36,870 for an individual, $46,647 for couples, $53,093 for three person households, $63,951 for four person households, and an additional $6,900 for each addition family member.
- Chapter 13 Bankruptcy is commonly referred to as ‘wage earner’ bankruptcy. This is because Chapter 13 is designed for individuals or sole proprietors who earn a steady wage. With a steady wage, one may ask why bankruptcy is needed. This form of bankruptcy is used to reorganize one’s debts and plan repayment. A private individual can have no more than $1,010,650 in secured debts or $336,900 in unsecured debts to qualify for this form of bankruptcy. After filing, the collections process ceases, but individuals must follow closely to the repayment plan created with the bankruptcy trustee, who in this case is a communicator between the debtor and creditors. Amendments to the Chapter 13 reorganization strategy can be made to the initially proposed repayment plan, but must be cleared by the bankruptcy court.
When someone files for Chapter 13 or Chapter 7 bankruptcy, bankruptcy laws mandate relief from creditor actions, including foreclosure proceeding, until the courts can sort the financial situation out thoroughly. However, this does not guarantee the home will stay in possession of the debtor. If certain foreclosure actions occurred before the individual’s bankruptcy was filed, then the lender may continue with the foreclosure in rare cases. However, reorganization under Chapter 13, which specifically addresses the repayment of mortgage obligations, may allow debtors to keep their homes in light of impending foreclosure.
In the state of Alabama, debtors may claim exemptions under the state exemptions list, as well as the federal supplemental exemptions list. Exemptions specifically allotted in the Alabama state exemptions list include:
Type of Asset(s)
Details on Applicable Exemption(s)
Real estate property or mobile homes up to $5,000, which doubles for married couples.
Disability benefits up to an average of $250/month.
Life insurance benefits from parent, if individual claiming exemptions is child or spouse.
Annuity benefits up to an average of $250/month.
Property of joint business ventures are exempt
Pension benefits of law enforcement officers, judges, teachers, and other state servants are exempt.
Workers compensation benefits and unemployment benefits are exempt assets.
Up to seventy-five percent of unpaid earnings, and more if low-income earners.
All Federal Supplemental Exemptions are included in exempt assets in AL bankruptcy filings.
- Use a Bankruptcy Lawyer - A bankruptcy lawyer will provide sound, accurate legal advice, which will prove much more useful that one might expect. Not only will a bankruptcy lawyer be present with you in stressful meetings and court dates for moral and advisory support, but also the attorney will be aware of state specific rules, regulations, and most importantly, exemptions and protected assets.
- Use a Filing Service - In a time of financial crisis, a filing service may seem enticing, because of the lower costs in lieu of an experienced bankruptcy lawyer. However, filing services are of little actual help in that all these entities can do for a debtor is prepare and file paper work. The filing service route is not recommended, and none of their employees can provide advice for the best options and bankruptcy filing strategy.
- File “Pro Se” - Even more enticing during the time of financial strain is filing pro se. To file pro se is to file completely on one’s own accord. This means saving money without hiring a bankruptcy lawyer or enlisting the aid of a filing service for paperwork. However, this is a dangerous endeavor as most people are unfamiliar with all federal and state laws involved in filing bankruptcy.
Alabama Middle Bankruptcy Court Main Office
Dr. Frank M. Johnson, Jr.
Federal Courthouse Annex
One Church Street
Montgomery, AL 36104
Alabama Northern Bankruptcy Court Main Office
120 Robert S. Vance Federal Bldg
1800 Fifth Avenue North
Birmingham, AL 35203
Alabama Southern Bankruptcy Court Main Office
United States Courthouse
201 St. Louis Street
Mobile, AL 36602-6602