In 2005 Congress overhauled the bankruptcy laws to make filing a true “last resort” for Alabamans and all of America. Under the old rules, all someone needed to do to file Chapter 7 bankruptcy was to get a lawyer, submit their court documents, sell their non-exempt assets (if applicable), and poof---there debt was discharged. Today, however, one must first show that they legitimately cannot afford to pay back their debt. First, if a debtor’s income exceeds the median income of the average same-sized household in Alabama, he or she must past the bankruptcy means test in order to qualify for Chapter 7. Listed below is the state’s median income information as of 2006. You may want to speak with a local debt lawyer to learn more about what these figures are as of today.
2-person families: 43,674
3-person families: 49,688
4-person families: 60,298
5-person families: 55,104
6-person families: 61,436
7-or-more-person families: 54,104
In the event that your annual income exceeds the median and you fail to pass the means test, you would be forced to file Chapter 13 bankruptcy. In this chapter of bankruptcy, the courts require you to turn over all of your disposable income to a trustee for a period of three to five years, and even though you are essentially paying off the debt on a credit card repayment plan, your will still suffer the same catastrophic credit effects since it is still considered a bankruptcy.
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Or if you are interested in learning about some of the other credit and debt topics pertaining to Alabama, feel free to browse these links:
Alabama Consumer Credit Counseling Services
Alabama Bankruptcy Laws
Alabama Debt Collection
Bankruptcy Figures in Alabama
2004: 41,647
2005: 47,513
2006: 19,420
As you can see the new bankruptcy law changes that went into effect in 2005 affected the number of filings in Alabama dramatically. In all both Chapter 7 & 13 bankruptcy filings dropped by 59.1 percent between 2005 and 2006. This can be contributed to fewer people qualifying for bankruptcy and the fact that the new laws have made it a less attractive option in itself. Another factor is so many people filed in 2005 in light of the upcoming reforms that fewer people needed to seek bankruptcy relief in 2006.