Bankruptcy – Alabama
Like so many others across America, many Alabama residents who are experiencing extreme financial hardship and unable to pay their debts may be considering bankruptcy. If you are struggling with credit card debts and other unsecured debts, such as medical bills and utilities, and are experiencing an unexpected financial hardship, you may be wondering about bankruptcy – how it works, the different types of bankruptcy, and how it can potentially give you a new financial lease on life. Bankruptcy may be a good option for some consumers, but it's wise to explore all of your debt relief options before making a serious decision. Other debt relief include credit counseling, debt consolidation, debt management, or even debt settlement or debt negotiation.
Debt consolidation allows you to combine your high-interest credit card and unsecured debts – such as utilities or medical bills – into a single monthly payment that is more manageable and predictable. This type of debt consolidation program may also be called credit counseling or debt management. Another debt relief option is debt settlement, which may allow consumers to settle their credit card debts for significantly less than the full amount owed. Both debt consolidation and debt settlement have become increasingly popular debt relief options as alternatives to personal bankruptcy, which can have a more severe, longer lasting effect on personal credit.
To learn more about your available debt relief options, take a moment to answer a few, simple questions and get a free debt relief estimate and savings analysis.
Bankruptcy is a legal process whereby qualified individuals and businesses have the opportunity to have their debts discharged. It's possible for a bankruptcy court to protect an individual from creditors during bankruptcy proceedings, if the individual can prove eligibility. This debt relief option is often known as a last resort for individuals and businesses who are experiencing a genuine financial hardship and want to make a new beginning in order to get their finances – and life – on track. A straight bankruptcy can typically remove your financial obligation to pay most of your credit cards and other unsecured debts. It can also afford relief from foreclosure. One of the most commonly asked questions about bankruptcy in Alabama is whether or not financial obligations such as alimony, divorce payments, child support, or student loans are excused. These debts are not usually covered by bankruptcy.
Chapter 7, Chapter 11 and Chapter 13 are the three main types of bankruptcy. Chapter 7 bankruptcy is also known as straight or total bankruptcy, or liquidation. Under Chapter 7, a consumer will typically have to surrender all property. While some property will be immune from this rule (termed exemptions, i.e. homestead exemptions), exemption laws vary by state, therefore it is important to consult Alabama laws to clarify which types of property are affected. Also, since bankruptcy is such a serious financial consideration, it's wise to consult with an attorney or financial advisor before choosing the best course of action.
Chapter 11 bankruptcy is commonly referred to as reorganized bankruptcy. According to the United States Federal Courts, this type of bankruptcy is most frequently used by a company or organization that is facing financial hardship, but wants to remain in business. The company or organization must pay its creditors according to a court-created debt reorganization plan but it will be allowed to continue to operate under Chapter 11.
Lastly, Chapter 13 bankruptcy is a debt adjustment, not a form of bankruptcy that thoroughly eliminates debts. An individual would likely file for this type of bankruptcy if they desire legal relief from debts and are also willing and able to follow a formal debt payment plan based on their current income.
Alternative Options to Filing Bankruptcy
Bankruptcy is a form of relief that can clear debts in situations where an individual is truly out of options and can no longer meet their financial obligations. However, it is an option that has severe financial and legal implications and it is the option that has the most detrimental impact on personal credit, so it should be considered carefully before pursuing it.
Some of the most popular forms of debt relief typically include debt consolidation or credit counseling and debt settlement. Debt consolidation allows individuals to combine multiple higher-interest cards and other unsecured debts into a single, more affordable payment each month. Typically, debt consolidation programs are coordinated by credit counselors who customize a debt management plan, or DMP, providing consumers with a more structured and more predictable path to get out of debt.
Debt settlement is generally a negotiation process between the debtor and individual creditors. When you enter into a debt settlement program, the goal is to negotiate or settle with creditors for significantly less than what's owed. However, debt settlement has risks: With debt settlement, your credit rating will typically decline because this option involves falling behind on your payments to save up funds, over an extended period of time, that you can use to make a settlement offer. As you fall behind in making your payments, your credit score will likely go down, especially if you had good or excellent credit prior to the debt settlement process. Also, many consumers enrolling in a debt settlement program may face legal action for defaulting on the terms of their credit card agreements. But in spite of the risks, debt settlement is still a popular alternative for many consumers seeking to resolve their debts.
State Programs and Services for Low-Income Individuals
While debt relief programs help many Americans during times of financial hardship, some people may also benefit from state-assisted programs and services to help them pay for utility bills, grocery bills, or childcare. To help low-income individuals and families get access to basic needs and services, the state of Alabama has a variety of financial assistance programs available, such as the Food Assistance Program (SNAP), Medicaid, and the Low-Income Home Energy Assistance Program (LIHEAP), among others. To learn more about these services, go to the state's homepage and click on the Benefits page.
Compare Your Debt Relief Options
Whether it's in the form of debt consolidation through credit counseling or debt settlement, you should compare and contrast all of your debt relief options in order to make an informed decision about what's right for you and your family.