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Written by Attorney Andrea Wimmer.
Updated July 30, 2020
If you are wondering whether filing a Chapter 7 bankruptcy in Alabama is right for you, you are in the right place. First of all, give yourself a pat on the shoulder for even researching your options; a lot of folks wait too long to get relief, or go in blind, relying only on the anecdotal experiences of friends and relatives when making important financial decisions. This guide will provide you with an overview of things to keep in mind when filing an Alabama bankruptcy, so you're off to a good start. Secondly, take a deep breath. Whether you are drowning in medical bills, in over your head on your car loan, or just having a hard time getting all your bills paid every month, bankruptcy can help. Finally, remember, bad things happen to good people and there is no shame in seeking the protection under Alabama bankruptcy laws. After all, if it's ok for athletes,celebrities, and even entire counties in Alabama to seek protection from the bankruptcy courts, why should you not be able to get the same protections?
How to File Bankruptcy in Alabama for Free
The most expensive part of filing an Alabama bankruptcy is usually your lawyer's fees. The good news is that you don't have to hire a lawyer if you don't want to, especially if you are filing under a Chapter 7 case rather than a Chapter 13 case. Additionally, even though there is a court filing fee of $335 for everyone filing Chapter 7 in Alabama, if your income is less than 150% of the federal poverty guidelines, you can get this fee waived.
Collect Your Alabama Bankruptcy Documents
Your Alabama bankruptcy documents are the documents you need to collect to make sure you provide the most accurate picture of your financial situation to the court. In addition to your most recent income tax return, you should get a free copy of your credit report from each one of the three reporting agencies. It's important to give the court a complete listing of everyone you owe money to, along with their current mailing address, and the credit report will be the best place to get most of that information. Keep in mind, however, just because a debt is not on your credit report does not mean that you don't owe it. Especially recent medical bills often won't show up, so make sure you also go through your mail to see if there is anyone else trying to collect money from you. You also have to collect every paycheck stub for the last 6 months. While you won't need it right away, this is also a good time to collect the statements for your bank accounts and any paperwork you may have received from a creditor who filed a lawsuit against you. Filing bankruptcy in Alabama means disclosing certain facts about your financial circumstances and having all of your documents organized, and in one spot, makes it less likely for you to accidentally leave anything out.
Take Credit Counseling
People file a Chapter 7 in Alabama in order to get a fresh start by having their debts discharged. When the bankruptcy laws were amended in 2005, Congress felt it was a good idea to help educate consumers about their bankruptcy options by requiring that everyone who files for bankruptcy relief take a credit counseling course beforehand. In order to ensure that the quality of the course is the same throughout the country, the course providers have to be pre-approved for each district. For folks filing bankruptcy in Alabama, the bankruptcy administrator for the Middle District,Northern District, and Southern District each independently publishes a separate list of companies that are approved to offer the course in their district. The course itself usually takes less than 2 hours to complete, and your certificate of completion will be valid for 180 days. Make sure to put your certificate with the rest of the documents you have already gathered, so you know where to find it when it's time to go to the courthouse to file your case.
Complete the Bankruptcy Forms
This is where pen is finally put to paper and all your hard work in getting organized before filing Chapter 7 in Alabama will start to pay off. Since all the forms required for an Alabama bankruptcy are available online for free, you don't have to worry about paying for them. In fact, you can actually download all of the forms needed in a fillable PDF format that you can save to your computer to work on over time. If you are working with an attorney, they will complete the forms on your behalf based on the information you provide to their office. The most important thing to remember during this step is to go back and double check your answers. Making a mistake on the forms needed for a Chapter 7 bankruptcy in Alabama can have serious consequences, and taking your time now can pay off down the road. If you are proceeding on your own, you should also carefully review this 49-page instruction manual for completing bankruptcy forms.
Get Your Filing Fee
As you know, the court filing fee for a Chapter 7 bankruptcy in Alabama is $335. Normally, this fee is due in full at the time your case is filed with the court. If you qualify for a fee waiver, you should complete this fee waiver application to have the filing fee waived now, and bring it with you when you go to the courthouse to file your case. Fee waivers are only granted if your income is less than a certain amount and the court determines that you are unable to pay the fee in installments. If you know ahead of time that you don't qualify for a full waiver, it's best to be proactive and instead of waiting for the judge to deny your application, ask the court to allow you to make payments on the fee after you are done filing Chapter 7 in Alabama. Be careful if you go that route, though, as missing just one payment will likely get your Alabama bankruptcy case thrown out.
Print Your Bankruptcy Forms
After you have completed all the forms you need to file your Chapter 7 bankruptcy in Alabama, taken the first credit counseling course, and made a game plan on how to handle your court filing fee, it's time to get everything printed and ready for filing. The court requires that all documents be printed on white paper, with one sheet per page. If you don't have a printer at home, you should check your local library to see if they allow patrons to print from their computers and, if so, how much it would cost. If possible, it's a good idea to print two full copies of everything. The clerk of the court will keep the copy you bring in for filing; leaving you with nothing to refer back to the information you provided when filing Chapter 7 in Alabama if you don't have your own copy.
Go to Court to File Your Forms
Even though there may be multiple hearing locations in your bankruptcy district, make sure the one you plan on visiting to file your Chapter 7 bankruptcy in Alabama is fully staffed. For example, if you are in the Middle District of Alabama, the only office you can visit to file your case is the Montgomery office. Since you will be entering a federal courthouse, make sure you dress appropriately and leave any weapons you might normally carry at home. You will also have to show your picture ID on your way in, so keep that handy. Once at the courthouse, find the clerk's office and let them know what you’re looking to do. They will then assist you in filing bankruptcy in Alabama and provide you with your official case number when done. The clerk's office typically closes to the public at four o'clock each day, so plan your trip for earlier in the day, especially if you have to file the same day to stop a foreclosure or wage garnishment from moving forward.
Mail Documents to Your Trustee
After your case is filed, a trustee is assigned to administer it. Basically, the trustee's job is to make sure that your creditors are getting what they are due under Alabama bankruptcy laws. The benefit of this is that you don't have to deal with each and every creditor representative separately. Part of the trustee's review of your financial situation involves a review of your federal income tax returns. That's why everyone filing Chapter 7 in Alabama has to send a copy of their most recent return to their trustee more than 7 days before their creditors' meeting. In addition to the tax return, your trustee may ask you to send them some other documents, such bank statements or paycheck stubs. It's important to respond to the trustee's requests in a timely manner, so they can properly prepare for your creditors' meeting. Even though the trustee does not represent you or your interests, generally speaking, making the trustee's life easier by following their instructions will make your life easier. The worst thing you can do is make it seem as though you are hiding something, because that will really peak the trustee's interest in the details of your Chapter 7 bankruptcy in Alabama.
Take Bankruptcy Course 2
In addition to the credit counseling course you took before your case was filed, you have to take a financial management course after filing Chapter 7 in Alabama. This second course is a requirement under the bankruptcy code and if you don't take it, you will not get your discharge. Once you are done, you get a certificate of completion. This certificate has to be filed with the bankruptcy court. If you don't take the course (or don't file the certificate, notifying the court that you took it), your Chapter 7 bankruptcy in Alabama can be closed without a discharge being entered. As before, it's important to take this course through one of the providers approved to offer it in your district. There is a small cost associated with this second course too, but just remember to keep things in perspective. Paying even $50 (though that's probably on the higher end of the price range) in exchange for getting rid of almost all of your debts is definitely worth it.
Attend Your 341 Meeting
Your creditors' meeting, also called a 341 meeting because it's based on Section 341 of the Bankruptcy Code, will take place about a month after your case is filed. It's when you get together with your case trustee to answer some questions about your financial situation. Don't worry, though, no one is there to judge you or ask you why you had to file a Chapter 7 bankruptcy in Alabama. Remember, the trustee's job is to make sure everything is done according to Alabama bankruptcy laws and that means having you verify, in person, some of the information you put in your bankruptcy documents. You also have to bring a government issued picture ID and acceptable proof of your social security number. The meeting is easy enough to prepare for, and on the day of the meeting your most important job is to show up, IDs in hand, and answer the trustee's questions about your case truthfully. Your creditors can show up to ask you questions as well, but that’s not something that most people filing bankruptcy in Alabama actually have to deal with, as it rarely happens.
Dealing with Your Car
When you file a Chapter 7 bankruptcy in Alabama, everything you own is an asset, even your car. The question of what happens to your car depends on how much it's worth and whether you are still paying on a car loan. If your vehicle is paid off, then you get to keep it as long as your car is worth less than the allowed exemption. If you are still making payments on the car, then you can keep it as long as you keep the debt that is on it. You can't keep the car without paying for it. That is not how it works outside of bankruptcy and, therefore, it's not something that can be done as part of a bankruptcy. However, if your car's value is much less than what you still owe on the loan, then you can buy the car for its current value and get out from under the loan that way. This is called a redemption. If the loan terms are manageable, and you know you can make the payment every month without a problem, you can also enter into a reaffirmation agreement to keep things basically the way they were before filing Chapter 7 in Alabama. Finally, if you don't want your car any more, you can surrender it to the bank without having to worry about the remaining loan balance.
Alabama Bankruptcy Means Test
Before you can file Chapter 7 bankruptcy in Alabama, you have to make sure you pass the Alabama means test for bankruptcy, especially if your household income exceeds the income limits. The income limits are based on the median household income for a household of your size. If you fail this first part of the Alabama bankruptcy means test, you may nevertheless qualify to file Chapter 7 bankruptcy in Alabama if part two of the means test calculation concludes that you do not have sufficient funds left at the end of the month to pay your creditors.
Data on Median income levels for Alabama
Alabama Median Income Standards for Means Test for Cases Filed On or After May 1, 2020
|Household Size||Monthly Income||Annual Income|
Data on Poverty levels for Alabama
Alabama Fee Waiver Eligibility for Cases Filed On or After May 1, 2020
Eligible for fee waiver when under 150% the poverty level.
|Household Size||State Poverty Level||Fee Waiver Limit (150% PL)|
Alabama Bankruptcy Forms
Everyone that files a Chapter 7 bankruptcy in Alabama has to use the same forms - the official bankruptcy forms - that are in use across the country. If you are not using an attorney, you can get a free copy of the forms online. Alabama bankruptcy forms also include some local forms specific to the District your case is filed in.
Middle District of Alabama Requirements
This district covers 23 counties in central and southeastern Alabama and is divided into 3 divisions. The Northern Division, with its seat in Montgomery, the Eastern Division, which holds court in Opelika, and finally the Southern Division, with a courthouse located in Dothan. If you have questions or want to file your Chapter 7 bankruptcy in Alabama in person, you can only do so in Montgomery. Although hearings take place in the other two locations, there is no bankruptcy clerk available to assist you. The Middle District requires that each debtor file a separate statement regarding their paycheck stubs if they are not filed with the court.
Northern District of Alabama Requirements
The Northern District of Alabama is comprised of the northernmost counties in the state. The courthouses in this district are located in Anniston (Eastern Division), Decatur (Northern Division), Birmingham (Southern Division), and Tuscaloosa (Western Division). The county you live in determines which division your Alabama bankruptcy will be filed in. If you are in the Northern Division, you may have to head to one of the satellite court locations in Florence or Huntsville for your 341 meeting or a hearing.
Southern District of Alabama Requirements
The Southern District is the smallest of the three districts with courthouses located in Mobile and Selma. The Selma courthouse is used only for hearings, and you cannot file documents for your Chapter 7 bankruptcy in Alabama there. When you head to the court in Mobile, make sure you check out the court's detailed parking guide to find out what's near the courthouse. This district has a specific form to file if you are leasing your car, and want to keep the lease even after your Alabama bankruptcy is done.
Alabama Bankruptcy Exemptions
Exemption laws are the specific provisions in either state or federal law that protect your property from your creditors. Everyone filing a Chapter 7 bankruptcy in Alabama has to use the Alabama bankruptcy exemptions, and cannot take advantage of the federal bankruptcy exemptions. You will be able to take advantage of a so-called "wildcard" exemption in Alabama that allows you to protect any property you want, even if it is not otherwise protected. Before filing your Alabama bankruptcy, make sure you check the limit amounts of each exemption, as they are adjusted by the State Treasurer every three years.
Alabama Bankruptcy Lawyer Cost
When you are looking into filing a Chapter 7 bankruptcy in Alabama, your first instinct may be to avoid hiring a lawyer, after all, the cost of a bankruptcy lawyer averages a little more than $1,000 per case. Keep in mind, however, how much debt you are able to walk away from as a result of your Alabama bankruptcy. If there is anything even a little bit out of the ordinary with respect to your financial situation, hiring a lawyer may be a good investment.
Attorney cost estimate: $815 – $1,500
Alabama Legal Aid Organizations
Alabama legal aid organizations offer free legal services in civil matters to folks who cannot afford an attorney, and if your household income is less than 150% of the federal poverty guidelines, they may be able to help you for free. Legal Services of Alabama, the Madison County Volunteer Lawyers Program, and Volunteer Lawyers Birmingham are just three of the options listed as a possible resource for folks considering a Chapter 7 bankruptcy in Alabama by the bankruptcy court in the Northern District of Alabama.
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Alabama Court Locations
Robert S. Vance Federal Building
1800 Fifth Avenue North Birmingham, AL 35203
Tuscaloosa Federal Courthouse
2005 University Boulevard Tuscaloosa, AL 35401
Frank M. Johnson, Jr. United States Courthouse
One Church Street Montgomery, AL 36104
John A. Campbell United States Courthouse
113 St. Joseph Street Mobile, AL 36602
United State Bankruptcy Court
201 St. Louis Street Mobile, AL 36602
Seybourn H. Lynne United States Courthouse
400 Well Street Decatur, AL 35601
Alabama Bankruptcy Judges
|Middle District of Alabama||Hon. William R. Sawyer|
|Middle District of Alabama||Hon. Bess M. Parrish Creswell|
|Northern District of Alabama||Hon. James J. Robinson|
|Northern District of Alabama||Hon. Tamara O. Mitchell|
|Northern District of Alabama||Hon. Jennifer H. Henderson|
|Northern District of Alabama||Hon. Clifton R. Jessup Jr.|
|Northern District of Alabama||Hon. D. Sims Crawford|
|Southern District of Alabama||Hon. Henry Callaway|
|Southern District of Alabama||Hon. Jerry Oldshue|