In the state of Alabama there are two forms of bankruptcy: Chapter 7
and Chapter 13. Each form has its own requirements to meet in order to
file for the bankruptcy. The following are debts that are eligible for
filing on a bankruptcy.
Items not allowed in bankruptcy filing: Alimony/Child Support
Student loans (some are allowed in Chapter 13)
Purchases exceeding $550 purchased up to ninety days before filing.
Fines/Penalities owed to government agencies
Cash Advances/Pay Day loans exceeding $825
Chapter 7 Bankruptcy: Chapter 7 bankruptcies are filed either with assets or as a no
asset bankruptcies. Chapter 7 bankruptcies with assets are basically a
liquidation of all assets in order to use funds to pay off all allowed
debts. The court appoints a trustee to take possession of an
individual's assets and sells them. They then use these funds to pay
each debt off and to pay for administrative fees for the bankruptcy.
No asset Chapter 7 bankrupcty requires a means test which is completed
to determine eligibility for Chapter 7. This test is used to determine
if the individual is able to pay 25% of their nonpriority unsecured
debt. The courts and/or the bankruptcy attorney subtracts survival
expenses such as rent and/or mortgage payments and food expenses from
the individual's monthly income. Once this amount is discovered the
attorney or court will determine if the individual is able to use the
left over amount to pay 25% of their unsecured debt (i.e., credit
cards). If so, they are not eligible for Chapter 7 but could attempt to
file Chapter 13. If they cannot pay this 25% of their nonpriority
unsecured debt they are eligible.
If the yearly income of the individual is more than $32,654 they are
not eligible. However, if their yearly income is less than $32, 654
they are eligible. For married couples their income should be less than
$41,853. With one child their income is allowed to be no more than
$46,505, and with two children it should be less than $53,690.
Chapter 13: Chapter 13 bankruptcy organizes debts so that the debtor has
more time to pay off their debts. These debts are stretched over a
period of five years.
In order to file for Chapter 13 bankruptcy the individual must have:
(1) a stable income, (2) less than $1,010,650 secured debt, and (3)
less than $336,900 unsecured debt.
When the attorney files they will file a projected payment plan for the
next five years that covers all debts within the bankruptcy. Once
approved you keep all of your assets and begin payments on this payment
plan immediately. If the individual misses one payment the courts will
discharge the bankruptcy and the individual will become responsible for
all debts immediately.
How to File:
The individual will provide the following to the court: List of creditors
Amount of each debt and type
How often the individual is paid and the amount
List of all property owned
Detailed list of living expenses The cost to file for bankruptcy is $299. Applied administrative
fees are $39 and $15 for the trustee. Once the bankruptcy is filed the
individual/petitioner has an automatic stay which means their creditors
cannot collect debts from them at that time. After twenty to forty days
of the date filed a 341 meeting is scheduled where creditors and the
court have the option to question the individual/petitioner under oath
regarding the debts. The period in which creditors have to try to have
your bankruptcy denied is sixty days following this meeting.
Properties exempt from Bankruptcies:
Exempt properties are properties that are not sold to pay off debts in
a bankruptcy. The following are the only properties that are exempt in
the state of Alabama:
Real Property that is valued at less than $5000.
No more than $250 per month annuity
No more than $250 per month disability proceeds
Personal belongings: clothing, family pictures, books, and burial plots
Equipment issued to individual by the military
No more than $3000 in cash Once all debts included within the bankruptcy are paid the
courts will discharge the bankruptcy. All debts included in the
bankruptcy will either show as paid on the individual's credit report
or is completely removed. The bankruptcy itself will remain on their
credit report for a period of no less than ten years.