How to File for Bankruptcy in Alabama

There is no doubt in anyone’s mind that the economy is difficult for everyone right now.  The result is that more people are considering bankruptcy.  It is a growing option everywhere, but in Alabama, the rate of consumer bankruptcy filings has grown 8% in a recent four-year period.  What is a consumer to do?

Finding a Bankruptcy Attorney

For most people, the first step is to consult with a bankruptcy attorney.  It is vital, although not required, to have that kind of expert help, and to have it early, even in the decision-making and planning processes.  Word of mouth can often be the most effective means of finding legal help.  However, it is vital for consumers to research the record of accomplishment, methods, and standards of anyone they may retain.

Bankruptcy Options

An experienced lawyer will not assume anything, but will help their client examine the options based on their specific circumstances.  There are essentially two choices for consumer bankruptcy:

• Chapter 7 – which is a liquidation of assets in order to pay off or discharge as many debts as possible.  Some debts cannot be discharged, such as alimony or child support, student loans, and tax debt.  This is generally the best choice for “no asset” consumers who have no equity that can be confiscated and sold to repay debt.
• Chapter 13 – which is a reorganization of a debtor’s finances and debt to create a payoff plan to be completed within five years.  This is generally best for those who have some disposable income each month and want to work hard to save the equity in their property.

Alabama Exemptions

Current bankruptcy laws allow debtors to protect certain types of property from confiscation and liquidation under chapter 7 bankruptcy.  However, while there are both federal and state exemption plans, Alabama allows debtors to use only state exemptions.

Alabama’s key exemptions include:

Filing the Petition

Once a debtor and their lawyer determine which options are best for them, the debtor completes the requirement for credit counselling.  The process then includes:

• Chapter 7
  • Filing for bankruptcy, at which time the judge places a “stay” on all collections
  • The court appointing a bankruptcy trustee to examine all debts and devise a plan
  • Attending a 341 meeting with creditors to answer questions concerning debts and assets
  • Discharging eligible debts
• Chapter 13
  • A bankruptcy trustee is appointed to help devise a three- to five-year repayment plan