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Bankruptcy In Alabama

5/5/2015

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Bankruptcy is Federal Law, so it should be the same in every state, right?  Not quite.  Unfortunately for individuals in Alabama the Bankruptcy Code allows individual states to opt out of the Federal Law in one key area; that is exemptions.  This in effect creates Alabama Bankruptcy Laws.

How does this affect Alabamians?  First, let us look at real estate.  The Federal Exemption for real estate is currently $21,625 for a single debtor or double, $43,250, for a married couple debtors.  This means a married couple could have a house worth $150,000 and only owe $100,000, that is $50,000 in equity, and still have no problem filing a Chapter 7 bankruptcy and keeping their house.

However, in Alabama the real estate homestead exemption is only $5,000 for an individual debtor and $10,000 for a married couple.  So, in the example above of the $50,000 equity, $40,0000 of it would be non-exempt in Alabama.  Therefore, a trustee in a Chapter 7 may seek to take the real estate to obtain the equity.  To save the house debtors may be force to file a Chapter 13 and pay this non-exempt equity to the trustee over a period of a maximum of 5 years.  Many debtors are not able to make these payments.

The Federal Exemptions are similarly higher and better regarding personal property as well, when compared to Alabama’s exemptions.

Every now and then, the Alabama Legislature does discuss raising our state’s behind the times exemptions.  Unfortunately, the banking and insurance lobby is much more powerful than the consumer lobby.  Hopefully, one day exemptions based on modern day real and personal property values will be passed in Alabama.

In the meantime, if you do have equity in your house, do not despair, there are still bankruptcy and non-bankruptcy options, of which you may be able to take advantage. Contact me or another qualified bankruptcy attorney immediately.  I have free initial consultations, so you have nothing to lose but a little of your time.
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How To Keep Your Stuff In Bankruptcy

5/5/2015

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Many of the clients I meet with believe that if they file bankruptcy, they will lose all their stuff, i.e. cars, house, etc.  About the same number of clients believe that if they file bankruptcy they can keep the stuff they owe on without paying for it.  Neither of these beliefs are true.

First, the great majority of people who file bankruptcy can keep the stuff they want to keep.  If you file a Chapter 7 bankruptcy, you must continue to pay for the stuff as per your original agreement with the lender.  If you file a Chapter 13, you can pay for the stuff through a plan and many times reduce your interest rate, payments, and sometimes even the balance to be paid back.  A Chapter 13 will also take care of payments you have missed prior to filing.

Even though a bankruptcy can sometimes help with payments, you still must pay for most property for which you owe.  The most common exception to this rule is for what the bankruptcy law call "non-purchase money security interest in household goods."  These are debts where when you borrow money, normally from a finance company, the lender asks you about appliances, furniture, electronics, or tools you already own and lists these items as collateral for the loan.  The bankruptcy law allows you to avoid these liens in many circumstances, and thereby keep this type of stuff without having to pay the debt on it.

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Bankruptcy is a Personal Decision

5/5/2015

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You may look at this title and think “Of course it is!  Why are you telling me something that is so obvious?”  Well, I am writing this because in my years of discussing the possibility of bankruptcy individuals, it is apparent that the great majority of people do not view bankruptcy as a personal decision.  People worry: “What will my parents or children or other family think?”; “What will my neighbors think?”; “What will my banker think?”; “What will my church think”; “I’ll be too embarrassed to let my house or car (that I can no longer afford) go back.”; and/or “I’ll be too embarrassed about my credit score.”

You must forget about what others may think and make your own decision based on what is best for you and your family.  Many of the people whose opinions you may be worrying about may be in a similar or even worse situation than you.  In addition, true friends and family are going to support you in making a decision that is best for your family.


How can bankruptcy be the “best” decision for your family?  First, it could save your marriage.  Many divorces are a result of financial stress.  Bankruptcy may be able to wipe away financial problems caused by bad decisions and/or bad luck; thereby, removing the blame and stress that can cause marital discord. 

Second and somewhat related, bankruptcy can give you some time back.  Are you working a second job or lots of overtime or extremely long hours just to be able to make your minimal debt payments?  If you can do it and are making progress, then by all means continue.  However, if it is taking a toll on your health and/or your time with your spouse and children and/or your going to have to keep it up for 20 years to pay off the debt, then it may be time to step back and see if this is really worth the toll it is taking.  Bankruptcy may be the way out.

Third, bankruptcy can stop a foreclosure of your house or a repossession of your vehicle.  Or in the alternative, bankruptcy can get you out of a house and mortgage or vehicle and car payment you can no longer afford.  So, bankruptcy is flexible enough to keep you in your family home, if that is what is best; or get you out of a bad deal and keep you from being sued if that is what is needed.

The bottom line is educate yourself.  Send me an email.  Make an appointment for a free consultation.  Find out what is best for you and yours and then make your own decision.  If filing bankruptcy is your decision, I am sure the people in your life you care about would rather you do this than see you go through some of the possible results of not filing.

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Hartselle Plaza

800 U.S. Highway 31S

Suite B

Hartselle, AL  35640


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(256) 778-1644


The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.
The Collins Law Offices help clients file for bankruptcy protection under the laws of the United States. 
Alabama State Bar Disclaimer: No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.
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