Alabama Bankruptcy Blog

New Book: The Alabama Bankruptcy Book

I have redone my book.  It is now The Alabama Bankruptcy Book.  It still has the Bankruptcy Myths from the prior book, but now has about 20 more pages with Answers to Common Bankruptcy Questions.  The best part is that is FREE to Alabama residents with no strings attached.  Now you can get the info you need to see if bankruptcy will work for you without having to see a lawyer first.  If you would like a copy of the book, click on the Contact Me link on the top left side of this page.  No one will call or bother you.

This book will dispel many myths and answer many questions regarding bankruptcy such as:

• The effects of the Bankruptcy Reform Act (HINT -- Bankruptcy still works)
• What happens to your stuff
• How to save your house or car from foreclosure or repossession?
• How to stop lawsuits, garnishments, and collection calls and letters?
• How you can still file and keep your property under the “new” laws?
• How you can still get credit after you have filed bankruptcy?
• How to wipe out credit card debt, medical bills and other debt?

 Don't believe the myths.  Educate yourself and don't let debt keep you down.

Do I qualify to file a Chapter 7 bankruptcy in Alabama under the “new” bankruptcy laws?

    Many people have been convinced that the bankruptcy reforms that went into effect in October of 2005 have made it impossible for most people to file Chapter 7 bankruptcies.  Nothing could be further from the truth.  Yes, there is now a “Means Test” which was intended to screen out people with “too much income.”  But, in my experience almost everyone whom I have counseled with regarding filing a Chapter 7 bankruptcy who could have filed for Chapter 7 bankruptcy before the 2005 reforms could still file a Chapter 7 bankruptcy after the reforms.  Nationwide studies have confirmed this -- Porter Study Finds Bankruptcy Law Reform Has Hurt the Poor Most and Bankruptcy Reform’s Impact: Where Are All the “Deadbeats”?

 

    How does the “Means Test” work?  First you see if you are over or under the median income for a family of your size in Alabama.  For a quick check click here.  If your household income is under the median income for the same size household in Alabama, then you have passed the “Means Test” and qualify to file a Chapter 7.

    If you are over the median income, it DOES NOT mean you are disqualified from filing a Chapter 7 bankruptcy.  Most people can still file.  There is just more paperwork to do.  With the additional paperwork you are allowed to deduct taxes, housing costs, transportation costs, secured debt payments, medical costs, and many other costs.  After deducting these costs, most people have very little income that could be used to pay unsecured creditors; and therefore, can file a Chapter 7 bankruptcy.

 

    The bottom line is, if you are having financial problems, do not let the “Means Test” scare you away from seeking good legal advice from a qualified bankruptcy attorney.  Despite anything you may have heard, there is a very high chance you can still file a Chapter 7 bankruptcy.  And, if you are one of the few who cannot file a Chapter 7, you can probably file a Chapter 13 bankruptcy and still be protected from creditors.

 

Richard L. Collins - Attorney at Law practicing extensively in Bankruptcy Law in Alabama - 422 Third Ave SE, Cullman Alabama

What does a bankruptcy do?

Here is a brief overview of a bankruptcy.

There may come a point in a person's life, whether its due to health problems, spending problems, employments problems, etc., where a person owes more money than even the tightest budget will allow him to pay.  When this happens and monthly payments begin to be missed, the people and businesses who are owed the money (the creditors) start calling and sending letters.  Eventually, if the creditors are not satisfied, there are foreclosures and repossessions of vehicles and/or lawsuits getting filed which will then lead to judgments, garnishments and liens.

A bankruptcy can stop most of these bad things from happening.  A bankruptcy can immediately stop the phone calls, letters, lawsuits, garnishments, foreclosures, and repossessions.  This is called the Automatic Stay and it "stays" all collection efforts.  A Chapter 7 bankruptcy will wipe out almost all unsecured debt, like credit cards and medical bills.  Most of the time under a Chapter 7 you will be able to keep your house and vehicles if you are current or almost current on those payments and continue to make your payments to those creditors as agreed to in your contract.

A Chapter 13 allows you to create a plan to pay some or all your debt back to the creditors.  A Chapter 13 can stop your house from being foreclosed on or your car from being repossessed by allowing you to pay back your arrearage over time.  It will also protect a house or vehicle in which you may have too much equity under the State of Alabama's exemption laws.  Alabama's exemptions are very low, so this comes in handy frequently.  The amount you pay back is based on your income and expenses and the amount of debt you need or want to pay back over the length of the plan.  Most plans last for five (5) years which is the maximum length of the plan.

So, the bottom line is a bankruptcy can stop collections of debt by creditors, wipe out all or part of your debt, and/or create a plan to pay back some or all of your debt while normally letting you keep the real and personal property you want to keep.

It is not all rosy though.  There are issues that can make filing bankruptcy very tough.  Bankruptcy also has long term effects on your credit.  I will deal with these issues in later posts.