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Alabama Bankruptcy Law Firm
Skilled Legal Guidance with Chapter 7 and Chapter 13 Bankruptcies in Alabama
Are you struggling with mounting debt? Are you having trouble keeping up with the minimum payments on your credit cards, personal loans, and other monthly obligations? Are you tired of all the harassing phone calls from debt collectors, and feel like there is no way out? If you are experiencing financial hardship, bankruptcy may be the right option to help you get back and your feet.
At Haygood, Cleveland, Pierce & Thompson, LLP, we understand that many good people fall on financial hard times, and we are committed to helping you get your financial life back on track. Since 1959, our lawyers have helped countless clients in Alabama obtain a fresh start through Chapter 7 or Chapter 13 bankruptcy. We have an in-depth understanding of federal and state bankruptcy laws, and we work closely with our clients to help them develop the most practical and effective solution to obtain financial relief.
Also sometimes referred to as a “liquidation bankruptcy” or “straight bankruptcy”, Chapter 7 is the most common type of consumer bankruptcy. Chapter 7 bankruptcy is used by consumers and small businesses to get rid of their unsecured debts and start afresh.
Most forms of unsecured debt can be discharged (eliminated) by filing for Chapter 7, including:
- Credit card debts
- Most unsecured personal loans
- Payday loans
- Medical bills
- Legal judgments
- Wage garnishments
- Utility bills
- Certain types of tax debt
There are some debts that you cannot discharge through Chapter 7. This includes Alabama state income tax debt and most IRS tax debt, government-backed student loans, child support, alimony/spousal support, credit obtained fraudulently, and debts incurred by causing injury or death to someone while intoxicated.
Chapter 7 works best for those who have a high amount of unsecured debts, very limited financial assets, and a low monthly income. To qualify for Chapter 7, you must earn less than the median income for the state of Alabama. If you earn more than the median income, you may still qualify if you pass the Chapter 7 means test, which is a complicated formula that depends largely on your “disposable income”, or the income you have left over after paying your monthly obligations.
Those who do not qualify for Chapter 7 may still be able to obtain financial relief through Chapter 13 bankruptcy.
Chapter 13 is a court-approved debt consolidation plan that allows individuals to restructure their debts into one monthly payment to pay back all their creditors over a designated period of time (usually three to five years). Unlike Chapter 7, Chapter 13 does not allow you to get rid of your debts entirely, although you may be able to have the interest and some of the principle of certain debts forgiven depending on your situation. In addition, Chapter 13 is only available to individuals and sole proprietors. Businesses cannot use this option.
Chapter 13 bankruptcy is sometimes referred to as a “wage earners” plan. In order for it to work, you must have some type of income to be able to pay back your debts. Many people choose Chapter 13 if they cannot qualify for Chapter 7 because their income is too high, and/or they want to be able to prevent their home from going into foreclosure. Chapter 13 can often be structured to repay the amount you are behind on your mortgage payments while resuming regular monthly payments.
Alabama Bankruptcy Exemptions
Although Chapter 7 is sometimes referred to as a “liquidation” bankruptcy, filers are allowed to keep real and personal property that is exempt under Alabama law. For example, the state allows a $15,500 individual exemption for equity you have in real estate or a mobile home, as long as you do not own more than 160 acres. For married couples, the exemption is doubled to $31,000.
The personal property exemption allows you to keep various household goods and furnishings, vehicles, tools, jewelry, computers, etc. The personal property exemption is $7550 per individual, and $16,100 for married couples. There are other assets and sources of income that are exempt no matter how much they are worth; including tax-exempt retirement accounts (e.g., IRAs, 401Ks, etc.), life insurance proceeds, workers’ compensation benefits, unemployment benefits, and burial plots.
Chapter 13 filers are able to keep all of their real and personal property. However, exemptions still come into play in determining how much you must pay back to certain creditors.
Clearly, exempt property is a very important consideration in deciding whether or not to file for bankruptcy, and which type of bankruptcy would work best for you. Be sure to discuss this issue in detail which your bankruptcy lawyer to help ensure that you are choosing the option that best fits your needs.
How will Bankruptcy Affect my Credit?
One of the most common concerns individuals considering filing for bankruptcy have is the impact it will have on their credit. There is no doubt that bankruptcy will not help your credit in the short-term. On the other hand, it may not hurt you as badly as you may think.
If you are in the position where you are considering either Chapter 7 or Chapter 13 bankruptcy, it means you are having a hard time paying your bills. This means there is a strong likelihood that you have already done things to severely damage your credit; such as utilizing a high percentage of your available credit and being more than 30 days late with various monthly payments. If this is the case, you probably already have a low credit score, so bankruptcy may not damage it too much more.
By filing for bankruptcy, you are taking steps to put yourself in a better position to meet your monthly financial obligations. It is true that the bankruptcy will stay on your credit report for 10 years. After the process is complete, however, you will have some financial breathing room, which will allow you to begin rebuilding your credit. Over time, the bankruptcy becomes less important, and how you manage your financial obligations post-bankruptcy becomes more important as far as your credit score is concerned.
Speak with a Skilled and Compassionate Alabama Bankruptcy Attorney
Many good people struggle with their finances. Job losses, expensive medical conditions, and similar setbacks often cause people to lose their financial footing. If you are in this position, Haygood, Cleveland, Pierce & Thompson LLP is here to help! We can sit down with you to take an honest look at your financial situation and advise you of the options you have available to you.
Call us today at (334) 731-7693 to schedule an initial consultation or send us a message through our web contact form. You may also stop by office in Auburn at your convenience.
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