Bankruptcy in Alabama: Consider The Alternative
According to the United States Bankruptcy Court, in Alabama there were a total 16,972 bankruptcy filings in 2021. This includes both personal bankruptcies and business bankruptcies. As of September 2021, Alabama’s total state debt was approximately $23.5 billion.
Bankruptcy Laws In Alabama
Bankruptcy laws in Alabama are governed by both federal and state law. The federal bankruptcy law is called the Bankruptcy Code, which is a set of rules and regulations governing bankruptcy proceedings throughout the United States. Alabama has its own set of bankruptcy laws that supplement the federal law. There are several types of bankruptcy under the Bankruptcy Code, including Chapter 7, Chapter 11, and Chapter 13. Each type of bankruptcy has its own eligibility requirements, benefits, and drawbacks.
Individuals have the option of filing for two main types of bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 bankruptcy is also known as “liquidation bankruptcy”. It is designed to help individuals who are unable to pay their debts. With Chapter 7, a court-appointed trustee will sell off any non-exempt assets to pay off as much of the individual’s debt as possible. It is important to note that some types of debt, such as student loans, taxes, and child support, cannot be discharged in Chapter 7 bankruptcy. Chapter 13 bankruptcy is also known as “reorganization bankruptcy”. It is designed to help individuals who have a steady income but are still struggling with managing debt. With Chapter 13, a bankruptcy trustee and a bankruptcy court create a repayment plan that allows the individual to pay off their debts over a period of three to five years. The repayment plan will be based on the individuals income, expenses, and the amount of debt that they owe. Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy does not include the selling of any assets.
In Alabama, there are 3 main types of bankruptcy that businesses can file for: Chapter 7, Chapter 11, and Chapter 13. Chapter 7 bankruptcy involves the sale of the businesses assets to pay off its debts. This type of bankruptcy is usually filed when the business is no longer viable and cannot continue to operate. Chapter 11 bankruptcy allows a business to restructure its debts and operations while continuing to stay in business. This type of bankruptcy is often used by larger businesses that have significant assets and can benefit from a reorganization plan. Chapter 13 bankruptcy is only available to sole proprietors and individuals, but it can be used to reorganize a small business’s debts. This option allows for a repayment plan over a period of three to five years.
Considering Business Bankruptcy? Keep This In Mind:
Bankruptcy should always be a last resort. Something you turn to once all other alternatives have been explored. If you’re considering filing for business bankruptcy in Alabama you should consider the consequences. Filing bankruptcy will have significant consequences for your business, such as bankruptcy on credit report, potential loss of assets, and limitations on future business activities.
What Debts Are Not Discharged In Bankruptcy?
While bankruptcy can help individuals and businesses eliminate certain debts and get a fresh financial start, not all debts can be discharged through bankruptcy. The debts that are not discharged depend on the type of bankruptcy filed, but some common debts that are typically not discharged include:
- Certain tax debts
- Student loans
- Debts owed to the government, such as fines and penalties
- Debts incurred through fraud, embezzlement, or theft
- Debts resulting from willful or malicious injury to another person or their property
- Court-ordered restitution or damages resulting from criminal conviction
- Debts owed for spousal or child support payments
- Debts for personal injury or wrongful death claims resulting from a DUI/DWI conviction
How Bankruptcy In Alabama Affects Your Credit Score
Filing for bankruptcy in Alabama can have a significant negative impact on your credit score. When you file for bankruptcy, the bankruptcy filing will be listed on your credit report for up to 10 years, and can reduce your credit score by as much as 200 points or more.
During the bankruptcy process, creditors may also report delinquent payments or charge-offs on your credit report, which can further damage your credit score. Additionally, if you have a significant amount of debt that is discharged through bankruptcy, it can result in a further reduction in your credit score.
How Bankruptcy In Alabama Affects Your Ability To Get A Loan In The Future
Filing for bankruptcy in Alabama can have a significant impact on your ability to get a loan in the future. After bankruptcy, many lenders may view you as a high-risk borrower and may be reluctant to extend credit to you. Additionally, bankruptcy can stay on your credit report for up to 10 years, which can make it difficult to get approved for credit, including loans, credit cards, and mortgages. Even if you are able to get approved for credit, you may be subject to higher interest rates and fees due to your bankruptcy history.
Statute Of Limitations For Collections In Alabama
In Alabama, the statute of limitations for collections depends on the type of debt involved. For example, written contracts, such as credit card agreements or personal loans, the statute of limitations is generally six years from the date the debt became due and payable. For oral contracts, such as verbal agreements to pay for services, the statute of limitations is also six years from the date of the debt became due and payable.
Cons of Bankruptcy
While bankruptcy can be a helpful tool for those struggling with overwhelming debt, there are also some cons associated with it. Here are a few:
- Bankruptcy affected credit hit
- Loss of Assets
- Public Record- Anyone can access the details of the filing
- Emotional toll- It can be emotionally draining and stressful
- Possible fraud allegations
While bankruptcy can be a useful tool for those struggling with debt, it is not without its downsides.
Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy
Why People Regret Filing Bankruptcy
People may regret filing bankruptcy for several reasons, including:
- Stigma- There is a social stigma attached to bankruptcy that can make people feel embarrassed, ashamed, or like they’ve failed.
- Financial Consequences- Filing for bankruptcy can have long lasting financial consequences, such as a lower credit score, difficulty obtaining credit or loans, and higher interest rates
- Emotional Impact- Filing for bankruptcy can be emotionally draining, particularly if it involves selling off assets or property that hold sentimental value. It can also be stressful to deal with the legal aspects of bankruptcy.
- Loss of control- Filing for bankruptcy means turning over control of one’s financial situation in court.
What Assets Can Be Lost In Bankruptcy?
Whether you will lose your home or car in bankruptcy in Alabama depends on the type of bankruptcy you file and the equity you have in the property. Under Chapter 7 bankruptcy in Alabama, you may be required to sell non-exempt property in order to pay off your debts. However, Alabama has generous exemptions for personal property, including a homestead exemption that allows you to protect up to $15,500 in equity in your primary residence. This means that if the equity in your home is less than the exemption amount, you may be able to keep your home in a Chapter 7 bankruptcy. Similarly, Alabama also has exemptions for personal vehicles, including a motor vehicle exemption that allows you to protect up to $3,000 in equity in one vehicle. If the equity in your vehicle is less than the exemption amount, you may be able to keep your car in a Chapter 7 bankruptcy.Under Chapter 13 bankruptcy in Alabama, you may be able to keep your home and car by creating a repayment plan that allows you to catch up on missed payments over a period of 3-5 years. It’s important to note that bankruptcy can be a complex process, and the outcome of your case will depend on your individual circumstances. Consulting with a qualified debt settlement firm can help you understand your options and make informed decisions about your property and other assets.
How Does Bankruptcy In Alabama Affect Tax Debts?
Bankruptcy in Alabama can affect tax debts in different ways depending on the type of bankruptcy filing and the specifics of the tax debt. It is important to note that bankruptcy does not automatically discharge tax debts. Additionally, bankruptcy may not relieve a debtor of tax liens or penalties associated with tax debts.
What Are Your Options If You Don’t Qualify For Bankruptcy?
If you do not qualify for bankruptcy in Alabama, you will need to consider alternative debt relief options, such as debt settlement. With debt settlement, a debt settlement firm negotiates with your creditors to reduce your debt and make it more manageable.
Why debt settlement in Alabama is better than bankruptcy
Debt settlement involves negotiating with creditors to reduce the amount of debt that is owed, typically through a lump sum payment. One advantage of debt settlement is that it allows individuals to avoid the negative consequences of bankruptcy, such as a bankruptcy affected credit score, difficulty obtaining credit in the future, and the potential loss of assets. Debt settlement can also be less expensive and less time-consuming than bankruptcy.
It is important to note that bankruptcy can have serious and long-lasting consequences on your credit score and financial future.
CuraDebt Is At Your Service
CuraDebt, a professional debt settlement firm, is a great alternative to bankruptcy. We have a team of debt professionals who are ready to help you better understand and potentially eliminate your debts. Contact us today for your free consultation. 1-877-850-3328