Alabama bankruptcy laws should be known by every resident of the state of Alabama. Knowing the federal and the specific laws within your state will help you understand the whole process of filing for bankruptcy. No matter how hard we try to avoid filing for bankruptcy, there will still be situations when it is unavoidable. Bankruptcy can be a way out of your debts like credit card and medical bills.
If you are declaring bankruptcy, the first thing you should do is hire a lawyer who knows the specific bankruptcy laws of the state to ensure that you choose the best bankruptcy chapter appropriate for your financial issues. It is the duty of the lawyer to help you determine that. The lawyer will ask you personal questions mostly about your finances to determine the state of your finances. Basing on the facts that he has collected, you can decide on what type of bankruptcy you need.
In the state of Alabama, you can choose between Chapter 7, also called straight bankruptcy and Chapter 13 or the wage earner bankruptcy. Choosing between Chapters 7 and 13 is an important decision and one in which you should seek your lawyer’s advice.
The Chapter 7 bankruptcy is called the “liquidation”. This easiest form of bankruptcy will give you a fresh start. The whole process involves a trustee who will take control of all your non-exempt assets, liquidates it, pays all your debts, and dissolves any outstanding debt. However, most people who file Chapter 7 bankruptcies do not own any non-exempt property so there are no assets to sell. To check if you qualify for Chapter 7, you have to take the means test. This test is administered to determine if your income is lower than the median income level in the state of Alabama, this way only those who could not really pay off their debts can apply for this bankruptcy type.
The Chapter 13 bankruptcy on the other hand, is the only other option you can choose if you can’t avail of the previous one. This bankruptcy type is called reorganization because the debtor will create and propose a 3- to 5-year repayment plan to catch up on late payments to creditors. Your trustee will help you create the repayment plan. The advantage of this bankruptcy type is you get to keep your assets as long as you can give your payments to the trustee who will pay the creditors based on the priority structure determined by the bankruptcy court.
During bankruptcy filing, there are a number of your assets that will be exempted from creditors. Alabama bankruptcy laws specify the following liquidation exemptions:
• Homestead exemptions – residential property or mobile home of up to $5,000 that does not exceed a 160 acres;
• Wages – 75% of earned, but unpaid wages;
• Personal property – worth $3,000 and can also include portraits, family albums, clothing, and books are also exempted; and
• Pensions and public benefits
Once you have made up your mind, you can then file for bankruptcy petition together with your lawyer in the bankruptcy courts. You will then fill out a form where you will list all your creditors together with all the pertinent information. As soon as you have filed bankruptcy, your creditors will be given an automatic stay notice where they are prevented to collect your debts.
The Alabama bankruptcy laws are quite complex, you need the expertise of your lawyer to explain it all to you.