Bankruptcy Alabama

As more and more Americans from around the country come to realize that their unsecured credit card debts have accumulated out of control, many of them have started thinking about the need for bankruptcy protection, and the citizens of Alabama are no exception. Of course, just because the various debtors have decided that looking into Chapter 7 or Chapter 13 bankruptcy protection may be in their best interest, there’s a little more information to be understood about the program before spending the money to talk with a bankruptcy attorney. Remember, declaring bankruptcy has changed greatly in the past few years, after congressional alteration of the United States Bankruptcy Code in 2005, in ways that many borrowers have yet to thoroughly recognize. More confusingly, each state maintains their own regulations and ever evolving additions to the bankruptcy code. In this article, we’d like to explore some of the changes that have been made nationally as well as those rules specific to the Alabama bankruptcy courts.

Every state maintains their own peculiar exemptions, of course, and Alabama’s hardly any different. When looking at the bankruptcy option, it’s of obvious importance to figure out the particular rules for your state of residency. Speaking of that particular guideline, you may be surprised to find out even the state you’ve been living in needs to be proven. No matter your ties to the state of Alabama, you can only file for bankruptcy for that state if you can legally demonstrate that you had lived in Alabama for seven hundred and thirty days – or, you know, two years – before declaration; otherwise, you’ll have to file in the state where you lived most of the six months prior to those two years. Regardless of those regulations, of course, every American citizen can still take advantage of the federal government’s exemptions, but, as you shall see, the Alabama exemptions are rather more profitable for the ordinary consumer.

Now, conversely, if you do use the Alabama exemptions you will not be able to make the federal ones available, but, once again, it will almost certainly make sense for Alabamans that qualify to claim that state as their primary residence to avail themselves of the Alabama regulations. Primary among these, as you’d imagine, would be the Alabama homestead exemption. Within Alabama, presuming you purchased your home more than three and one third years ago, you should be able to fully protect the value (meaning your stake, not the market value) therein. If you have lived in your primary residence for less than the past twelve hundred and fifteen days, you will be able protect only a hundred and twenty five thousand dollars worth of home equity based upon current mortgage loan debts and recent appraisal value. The reason for this should be clear: the Alabama state government doesn’t want its citizens buying houses just before they declare bankruptcy so as to hide any money. There are still further complications, of course. An exemption to the previously named exemption would be possible if you switched primary residences during the past three and a half years for essentially lateral values. However, if you’ve been convicted of a felony or owe any debts resulting from a violation of fiduciary law, racketeering, or similar crimes within the past five years, it will be much more difficult to take advantage of the Alabama homestead exemption unless it’s reasonably demonstrable that the individual or couple filing require the property for the support of the debtor or any dependents.

Now, remember Alabama, even though your equity in the home will be shielded from creditors’ seizure through successful Chapter 7 bankruptcy declaration, that does not mean that you can simply stop paying your mortgage bills and consider yourself protected from foreclosure. Instead, think of the homestead exemption as placing the property and mortgage outside the purview of bankruptcy protection and court oversight. Any liens which you have chosen to put on the home, such as trust deeds or equity loans or mortgages, are still thoroughly valid (and, of course, any liens attached by the Internal Revenue Service are to be considered completely untouchable regardless of Alabama law). The mortgage lender can still take possession of your home if you default upon payments for a succession of months, but this is hardly what they would prefer. Especially considering the current climate for foreclosures, mortgage loan companies would much rather opt to negotiate some new payment schedule or more advantageous terms to work with you during the bankruptcy so as to ensure that you keep your house and they need not suffer the ever growing legal costs or extended time line foreclosure would take. Speak to the mortgage representatives, keep them informed of your plans to declare bankruptcy, and figure out the best solution for both parties.

Sadly, for many debtors, this advice may come too late, and foreclosure proceedings may have already started for the home owner. In this case, you may want to think about entering a Chapter 13 bankruptcy instead of the more traditional Chapter 7 debt relief bankruptcy program. Chapter 13 bankruptcies essentially restructure your existing debts, including secured debt like mortgages, and even pay back the arrears that you had previously missed. In Alabama, a successful Chapter 13 would therefore force the mortgage lender to accept whichever plan you have worked out with the court trustee and, even if the lender has already started foreclosure proceedings on your property, effectively guarantee that it would be protected under the new debt payback solution. Now, in the case of secured loans like mortgages, Alabama bankruptcy statutes don’t allow a new restructuring of the existing mortgage beyond ensuring that the lender would allow you to repay what’s already owed (something many lenders would ignore if you’ve been sufficiently delinquent to engender foreclosure warnings), and this means you’ll still have to maintain payments as usual once you have caught yourself up with past defaults.

For borrowers who had already demonstrated problems with payments, this might not seem like a perfect solution. After all, you’ll have to pay out even more each month to the mortgage company (as well as keeping up with your homeowners insurance) while continuing to pay their regular bills with the additional funds owed to the Chapter 13, but, at the least, it’s a method by which you may be able to keep your home when things look their most bleak and one of the more advantageous aspects of the Alabama bankruptcy exceptions. Even if you still miss a payment or two after declaring bankruptcy, the trustee may still be able to talk with the mortgage company though this would be more difficult and far from guaranteed. Also, unfortunately, the bankruptcy must be filed before the foreclosure auction and subsequent sale of the home; once that happens, there will be no way for the Alabama courts to have any legal say on the property. The Chapter 13 process will require a careful attention to budgeting and what may seem like harsh deprivations for your household – it may even require a second or third job for those filing to earn enough money – but, at the end of the day, it may be your only chance to hang on to your primary residence.

There is, however, another element to be considered. By agreeing to the Chapter 13 bankruptcy debt restructuring program, you foreswear your rights to be considered for the Chapter 7 debt elimination plan, and, for borrowers who have amassed sufficient consumer debts, the exchange may not, in the end, be worth even the most beloved of properties. Of course, after the 2005 congressional alterations to the federal bankruptcy code, you may not even qualify for the Chapter 7 bankruptcy regardless of your amassed debts. Under the current regulations, each citizen must pass a so-called ‘means test’ that calculates whether or not they would be eligible for the debt elimination program by examining the median income for your state of residence. In Alabama, as of the first of February 2008, according to census bureau statistics (and these will, as you should expect, be regularly updated), the median income for individual heads of household was assessed to be just over thirty six thousand. It’s around forty five thousand when one dependent’s added, fifty two thousand for two dependents, sixty two thousand for three dependents, and an additional seven thousand should be added for each extra dependent. As long as your income is provably below such in Alabama for the six months previous to filing – with up to fifteen hundred dollars total deduction for secured loan payments such as homes and automobiles, expenses for education, tax liens, and court mandated obligations like taxes or alimony – then you would qualify for the Chapter 7 program. Otherwise, you’ll be handed over to Chapter 13 and forced to pay the majority of what’s owed.

Even if you do manage to qualify for Chapter 7 debt liquidation under the Alabama Chapter 7 statutes, it’s still a difficult process for most consumers. By agreeing to have the applicable debts (credit card accounts, generally) eliminated, you also allow the courts free rein to seize your assets for auction and eventual compensation to the affected lenders. Along with the other recent changes made to the federal bankruptcy code – credit counseling courses are also now required to be passed by those seeking to file at the borrowers’ own (rather substantial) costs – the court trustee now must determine the value of your possessions by estimating their replacement price instead of the considerably lower resale price. For many borrowers, this means they may lose every household object of worth from family heirlooms to jewelry with immense sentimental value. Depending upon the amount of your overall consumer debt, you may, once again, have no other real alternative, but this should certainly be fully understood before starting any such program.

As with most of these regulations, the exemptions allowed by the Alabama bankruptcy code are somewhat more lenient than the federal guidelines: though, remember, you have to choose between Alabama’s exemptions and what’s offered by the American government. We’ve mentioned the homestead exemption which protects residences under one hundred and sixty acres. Pension and retirement plans, compensation plans that had been deferred, health insurance, funds that had been invested for an heir’s education at least one year prior to filing (with a cap at five thousand for educational accounts contributed to less than two years prior), and three quarters of wages already earned but yet to be paid should be considered safe. Annuity and disability income up to two hundred and fifty dollars a month are also ruled exempt as well as life insurance benefits for the immediate family. Any property that is deemed necessary by the trustee for your employment as well as military equipment for acting servicemen are also exempt. Unlike what’s protected by the national government, Alabama’s far more lenient in exempting those items of personal worth (church pews, burial plots, books, family pictures and portraits as well as up to three thousand dollars of personal possessions, not counting the aforementioned life insurance). Your primary vehicle should be protected, but, if payments are still owed upon the automobile, you’ll have to reaffirm the debt within forty five days of the initial declaration of bankruptcy. Otherwise, the court trustee will not allow you to continue to repay the vehicle’s lender, and you will be open to repossession for the eventual delinquency.

Considering all of this, it’s of an obvious temptation to transfer any assets (from investments to actual property to the title of cars or homes) to friends or family, but this would be a grave error. The Alabama court trustee can block any such transfers that they feel were made fraudulently with the intention of deceiving the lenders. With the changes to the bankruptcy code, court trustees working under federal laws can examine past transfers for the past two years, but, here again, this flexibility greatly depends upon the state in question. Within the Northern District of Alabama, court trustees can (and generally do) analyze all such property transfers for up to a decade! Genuinely necessary transfers are still recognized as such, of course, but the bankruptcy documents must make mention and you must provide the proper paperwork alongside. Assume any transactions of note for the past ten years will be closely looked at, and prepare your documents accordingly. If, for what ever reason, the trustee believes that there was attempted fraud, you can almost be assured of criminal charges – as well as potential charges for whomever else accepted the transfer. Even if the bankruptcy has been already accepted, trustees continue to analyze the case throughout the term, and you may find yourself unable to receive a discharge and once again be open to harassment or lawsuits from the various lenders.

If the combined value of your assets is simply more than you wish to risk, if you want to make sure that the assets are protected from court seizure, a Chapter 13 bankruptcy may well make more sense. However, like so many elements of financial proceedings, it is hard for your authors to offer detailed advice without more knowledge of your specific situation. Even with the Alabama exemptions we have mentioned, this has been, as you should assume, far from a complete list of

what’s available for borrowers to take advantage of. For this reason as well as the increasing complexity of the paperwork involved (and the potential criminal charges for not understanding precisely what to notate), it truly behooves the ordinary borrower to talk with a bankruptcy attorney licensed within the state of Alabama no matter how expensive the lawyers’ assistance may be. Also, while you are first considering your various options, it would probably be a good idea to opt for a free consultation with one of the debt settlement companies in Alabama or one that you may find on line. These companies attempt to negotiate an overall reduction of credit card balances by utilizing the threat of bankruptcy and the promise of a heightened payment schedule typically less than five years. As ever, it won’t be the best alternative for every Alabaman borrower, but, before you potentially risk your assets through Chapter 7 bankruptcy, you should take a look at every other option possible.

Ways To Maintain Healthy Debt Management Partnerships

When your authors talk to people from every day walks of life about their financial circumstances - which, considering the all inclusive troubles currently affecting ordinary Americans, seems increasingly difficult for the average consumer – the topic of debt management comes up more and more frequently. It’s easy to understand why, of course. With credit card bills piling up and lenders clawing at the door (or, at least, blowing up your phone lines through the associated collection agencies), it can seem beyond imaginings for borrowers to actually clean up all of the accumulated debts within their lifetimes, and the idea that certified companies could step in and aid them with debt elimination quite reasonably can sound like an answer to their prayers. Within all of these discussions with ordinary consumers, however, we notice that many of the most excited applicants have very little understanding as to what debt management companies actually do. In this essay, we would like to go over a brief explanation of what debt management truly means as well as to explain how borrowers can get the most successful results from taking advantage of the programs offered. After all, while these sorts of businesses can be very helpful when attempting to lower your overall debts, there will be a good deal of work and discipline that you will have to undertake as well in order to become genuinely debt free (leaving aside home mortgages or investment loans) for the remainder of your life.

Essentially, debt management companies – more specifically, debt consolidation companies – take on all of the unsecured debt that has been amassed, and, once all of the details have been agreed upon and the contracts have been signed, the borrower then has to mail their unsecured debt payments to whichever debt management company they have chosen to with. In general, so that you understand, unsecured or credit card debts are the only ones that make sense; secured loans like home mortgages or car loans have no reason to agree to barter their terms with management professionals and they tend to have fairly low rates even without debt management help or refinancing. In any event, the debt management companies then work on negotiating a reduction of interest rates and/ or waiver of whatever fees and charges the creditors have collected during the previous spending problem months when payments may have been late and balances may have accidentally been charged over their limit. With Consumer Credit Counseling companies, they are generally able to significantly lower your payments as well as reducing the rates, but you have to be carefully about lowering your payments too much. While the decreased interest rates and waived fees help, of course, the most effective way of lowering payments is by extending the term of the debt consolidation, and you have to be sure you are not only pushing back the eventual debt management for the future. Also, by unnaturally lowering the payments, you sometimes leave yourself open to actually worsening your overall financial picture by means of the additional money made available. Lowering payments should only be used to either temporarily help you and your family through hard times or to allow a full and quick repayment of the worst debts.

Debt settlement companies take a similar tactic with rather different results. While they also consolidate unsecured consumer debts with the hope towards eventual debt elimination – and also greatly lower the interest rates by so doing – their negotiation technique insists upon reducing the balances. Sounds too good to be believed, but credit card representatives are all too aware that borrowers who think they cannot properly meet their payment or properly take charge of their loans will be more likely to avoid paying them entirely or, even worse, attempt the increasingly destructive Chapter 7 bankruptcy alternative. To ensure that the debtors maintain timely payments of their existing obligations, many representatives of the credit card lenders will cut the balances that the borrowers owe by as much as fifty, sometimes even sixty percent, when approached by a experienced debt settlement professional. That’s right, debt settlement consolidation can effectively shave off half of the borrower’s entire consumer debt burden through little more than negotiation, a relatively small fee paid by the borrower, and the discipline needed to brave budgetary constraints

Before you get too excited, though, things are not always quite that easy, and nothing is ever guaranteed of success. Some credit card companies will still refuse to barter with debt management professionals nor ever cut their balances even if they recognize that they risk losing everything from bankruptcy protection after changes in the bankruptcy code have made this option so unpalatable for ordinary borrowers. Also, even for successful debt negotiations, the going exchange for (what could be) tens of thousands of dollars of legally actionable debt balances suddenly erased tends to be a heightened payment structure that should clear up all current credit accounts in three to five years. For obvious reasons, this should be of far more benefit to borrowers than allowing balances to linger around for decades through ever lower payments, but, sad to say, it’s just not within the workable budgets of every American consumer. These sorts of artificially increased payments, depending upon the debt loads involved, could be far more than the minimum payments that the borrowers who had been seeking out debt management were originally unable to satisfy.

In terms of finances, there is another disadvantage to consider. Neither approach (nor any effective method of debt management) will be offered for free, of course. Borrowers should expect debt management firms to charge a pretty penny for their services both in terms of a charge at signing and relatively limited regular administrative fees. For any reputable company, however, the charges should be included within the overall consolidation package so that they never need make any large cash payment of significance; small initial consultation fees are sometimes requested so as to discourage the time wasting questions of attention seekers but they should not be above or fifty or seventy five dollars. Also, you should take into consideration that any of these debt management methods will effectively disable your credit options for a number of years. While debt settlement isn’t nearly as disruptive to FICO scores and credit ratings as Consumer Credit Counseling (which rivals Chapter 7 bankruptcy protection for destructive potential), all forms of debt management have some negative affect upon credit scores. For that matter, you must also remember that both Consumer Credit Counseling and debt settlement negotiations will require that you surrender all current credit card accounts for the duration of the programs which, as we have reported, can last several years, and the competent debt management authorities will also ask that you from opening new accounts during your work with the company so as to prevent further liability.

For this reason, it’s is so important that you take all necessary time when selecting a debt management program carefully to make sure that you pick the right one that best fits your needs. Go on-line or talk with the Better Business Bureaus and similar agencies to verify that the firm you are considering is legitimate and to be trusted with safeguarding your financial secrets as well as the eventual payments they must make on your behalf to the credit card companies and associated lenders. As happens with any successful burgeoning industry, the companies involved with debt management are hiring and training new professionals every day, and some of the debt counselors are bound to be less than trustworthy. Don’t worry, word of mouth and reputations above reproach are so important to all aspects of the financial community that any negligent or predatory debt management specialist will soon be found out and black balled from any reputable firm. Still and all, you have to be continually on guard to make sure that you are not being taken advantage of from one of the practitioners of sleazy business strategies. Desperate borrowers are always at the mercy of these scavengers, and, with unsavory programs or counselors, even debtors that are doing their best to eliminate their past obligations could be subject to the machinations of such scoundrels.

Of course, before even considering debt management, the smart and thrifty borrower will do everything necessary to put their bills in order and shore up the household economy to see if they can indeed solve their own domestic financial crisis without requesting the assistance of an external company. Even you do decide that you and your family require the need of debt management professionals, you should first cleave your expenses so as to see what sort of budgetary room actually exists. With the example of debt settlement negotiations, to take one instance, you must be absolutely positive that you will be able to regularly satisfy the payment schedule that they put in front of you. As well, it behooves the consumer looking into these programs to realistically take an assessment of their earning potential over the next year or two. For borrowers with small businesses or bonus laden salaries or even those that work in industries that may be hit hardest by the coming economic storm, this may be a tough pill to swallow – a proper mindset and positive outlook does so much to aid debt management; motivation really is the key to sticking with any successful approach to debt relief – but, nevertheless, it will have to be done. It does no one any good to be brave about household deprivation or promise the debt counselor funds you won’t be able to one hundred percent guarantee. Default on a debt management plan, and you will be in even worse trouble than if you had never attempted debt management in the first place.

Along with bringing your own copy of a workable budget to your first meetings with the debt management counselor, you should also carry away with you some documentation of what they promised. Clearly, for initial consultations, you should not expect the debt management company (or, at least, a reputable debt management company) to be able to offer much more than vaguest of estimations as to what your eventual interest rates or consolidation payments would be. It would even be a bit suspicious for the debt management company to hesitate a guess as to their actual costs for the services before they’ve sat down and fully analyzed your credit report and current unsecured debt burdens. While it’s important to be a cautious consumer, one must realize that the best of companies specializing in finance will want to be absolutely certain of every last detail regarding you and your debts before picking numbers out of the air. Still and all, at a certain point, it will come the time for good faith estimates as to what you should be able to expect for pricing, and, at that point, you need to get every single promise in writing to compare the contract not only against other debt management offers but also to vouchsafe your rights should anything go awry or the costs suddenly rise. For instance, make sure that there are not several different fees for what seems to be the same labor – a common practice is to list a relatively minimal monthly charge for administrative duties that is then repeated, in totem, as an annual expense – before you enter any working relationship with a debt management firm or counselor. If possible, bring the written estimate to any trusted professionals (whether friends or family or even work acquaintances or your other business partners) who’ve had previous dealings with this sort of enterprise to gauge their approval and advice.

Really, this should go without saying, but just keep proper records of all communications and make sure to get everything in writing no matter how much you may trust your debt management provider. As the old joke goes, a verbal contract isn’t worth the paper it’s printed on, and, even if your debt management counselor and company is thoroughly above board, the process may last quite a while and you may end up dealing with different specialists (or, for that matter, they may have different bosses with different priorities). Even with the best of companies, their costs may also rise in this period of recession and they would pass along the additional debt management expenses to you if you give them the chance. Certainly, for the terms discussed and the payments that are expected to be passed along to the credit card companies but are still often liable to the borrower’s credit, it couldn’t be of greater importance to the borrowers to make sure that they have recorded documentation of the debt management firm’s promises. Even when starting out upon the debt management program, you should remember to continue paying the lenders as scheduled until the time that you have received notices from the credit card company that are now accepting payments from whichever debt management company you decided to work with. Even if you are already in contact with the creditors about your plans and they have agreed to the new program (and open lines of communication should be maintained throughout proceedings), it’s still a good idea. While this may result in a superfluous payment or two, the credit cards will still be happy to receive the money and either put it towards the funds owed or the checks will be quickly returned.

We understand that most applicants considering debt management have already had trouble meeting their minimum payments, but it will only take a month or two for the debt consolidation to go into effect and you honestly do want to keep your FICO scores as high as possible. Once again, the meaning of debt settlement changes for every borrower, but it is never – particularly once debt consolidation is involved – a painless procedure. Typically, debt management bruises credit ratings for up to two years past total satisfaction of all outstanding unsecured bills, but this is not bankruptcy and, should you play your cards right, things will get better. Remember that the debt management authorities are only assisting you on the unsecured consumer loans and revolving debt. Utilities, mortgage payments, automobile loans, and, especially, above all else, tax liens are not affected or even noticed by most debt management counselors once they’ve put together your monthly and annual budgets, and you will still be responsible for putting away money to take care of the bills and sending those checks on time. Debt management companies, the more professional ones, should send out statements each month that detail exactly what has already been spent toward the accumulated consumer debts and what burdens remain to be eliminated. There should also be copies made available on the internet for your private records. With this known, keep close tabs on the payments back and forth to be completely convinced that everything’s working out on both sides of the equation, and be sure to keep track of things with the creditors as well: don’t always blindly trust the debt management company before you’ve verified accurate numbers.

No matter what, you shouldn’t let an oversight from the debt management company worsen your credit rating more than has already been accomplished through the escalating credit accounts. Sometimes the debt management billing cycles don’t quite match what the credit card company expects, and, through the explosion of business you could presume the more established debt management companies are now receiving, there’s some lag time with payments even though you have sent your own money to the consolidation address on time. In a perfect world, this should not be left up to the borrower, but it is our advice that you discover the payment schedule planned from the debt management company and square it with the lenders’ expectations of receipt. Of course, this is only meaningful if you do not disappoint the debt management programs through avoiding the payments you’re supposed to make to them through the course of the loan. Over a period of years of successful stipends, some debt management companies may allow you to miss a payment or two (with appreciable penalties, you understand) with prior warning, but, even if they know in advance that some financial mishap has disrupted your budgeting, do not presume that debt management companies will allow you to be slipshod with your responsibilities. They have consolidated your debts and, while acceptance to their programs means that you will not be allowed to declare Chapter 7 bankruptcy protection afterwards, they will still bear the brunt of your delinquencies should you abandon obligations. It’s a sort of relationship that you are entering with debt management, and, like all relationship, you want to make sure that both partners maintain their ends of the bargain.