Bankruptcy Laws and Procedures in Alabama
To a large degree, since the proceedings are carried out in a federal court and since the Constitution gives the federal government the right to make bankruptcy rulings, federal laws are going to determine exactly how the process works. However, that does not mean that there are no state laws that are applicable, and it is very important to know how these laws may impact you if you are in Alabama. Below are some of the most common and important state regulations that you should know about.
Filing in the Right Court
To begin with, you have to know which branch of the bankruptcy court to use. The states are divided into districts, with proper courts in certain counties. Make sure that you know what paperwork you need, how to fill it out, and where to file it. This is different for everyone, so you need to find the specific court that is in your district.
Going to Credit Counseling
In Alabama, you cannot simply file for bankruptcy without agreeing to counseling on your financial matters. This is mandatory counseling that has to be attended. The biggest thing that you should know about this is that you must do it prior to filing. Therefore, this is the first step that you need to take, or nothing else is going to be very relevant, since you will not be allowed to file at all.
Examining Your Income Levels
Since 2005, something called the Means Test has been used in Alabama to help determine which type of filing you can use. You may be interested in Chapter 7, for example, but you may actually need to use Chapter 10, depending on what you earn. Your specific level of income will have to be determined. If it turns out that you make more than the current average income of households in the state, you may be able to use Chapter 7, but more details will have to be examined, as you may have to use Chapter 10 instead. If you make less than the average, though, you can use Chapter 7.
This is an import law in a local sense because the average income is always shifting, and it is decidedly different from one state to the next.
Understanding Your Exemptions
Exemptions are things that you can keep even when you file for bankruptcy, ensuring that you do not lose all that you own, even if you use a liquidation plan under Chapter 7 bankruptcy. Under Alabama law, you may be able to use exemptions for the following:
- Your homestead, property or mobile home
- Some of your personal property, like clothes, computers, and the like
- Your wages, if you have earned them and not yet received them
- A wild card, which can be used for items of your choice
- More exemptions for the tools that you use in your profession, your pension plan, insurance policies that you have, benefits that you get from the government, and the like
Make sure that you know exactly what exemptions you can use; at the same time, you should know that they come with limits. For example, the Homestead Exemption is for just $5,000 for one person or $10,000 for a couple, the Wage Exemption does not apply to 100 percent of your wages, but just to 75 percent, and the Wildcard Exemption has a cap of $3,000.