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Chapter 7 Bankruptcy and Your Assets in Alabama

Bankruptcy
If you're struggling with debt and you feel you need a fresh start, then it may be time to file for a Chapter 7 bankruptcy. If you don't have any assets, then the process is much easier and you can be out of debt quickly.
However, determining whether or not you qualify to file for Chapter 7, or if you can be determined to have no assets, is complicated. You should consider doing a few things before you file for bankruptcy to make the process easier. Here's what you need to know.
Chapter 7 vs Chapter 13 Bankruptcy
The difference between the two main types of personal bankruptcy is that Chapter 7 completely wipes out the debt and Chapter 13 sets up a reasonable payment plan. Chapter 13 works better for people who have a regular income and who want to keep their assets. This is also important if you have a lot of equity in your home or other assets you want to protect.
Chapter 7 is more effective if you have little or no income or non-exempt assets. If you do have nonexempt assets, you will likely lose them with this bankruptcy type.
Chapter 7 Eligibility
Not everyone can qualify for Chapter 7 bankruptcy. You have to meet certain income and property guidelines. In Alabama, you can only file if you are below a certain income threshold. However, there is a means test that allows you to deduct certain expenses from your income, which could put you under the threshold.
You may also be required to attend credit counseling within a certain time period before filing. An attorney can help you determine whether you are eligible.
Asset Exemptions in Alabama
In Alabama, certain assets are exempt, though the value limits and thresholds are subject to change. Property, such as books, certain types of pensions, clothing, and personal photos are exempted outright. Other assets, such as wages, insurance payments, and annuities are exempt only up to a certain amount.
Your home and car, if you own one, get a limited exemption based on its equity. In Alabama, there is a wild card asset categorization for personal or miscellaneous assets up to a certain amount.
Asset Reduction
If you find that your assets exceed the exemption amounts, then you may want to reduce them before filing. One way to do this is by selling some of these items and paying off whatever creditors you can.
However, you must do this very carefully as, in some cases, this could be seen by the court as you trying to hide your assets. For example, the court would particularly frown on underselling an asset to a close friend or relative. Consult an attorney before selling off or doing anything else with your assets.
Documentation
You can strengthen your Chapter 7 bankruptcy case by keeping detailed documentation. Document your income and expenses including utility bills, food, and medical expenses. Make a list of what you own, how much is owed, and their value. If you sell anything and pay off any of your debts, keep documentation of that as well. You will also need your tax returns, real estate paperwork, and bank statements.
While Chapter 7 bankruptcy can help you get a fresh start, it may force you to give up a lot of assets, including your home. If you feel that you will be losing too much by filing a Chapter 7 bankruptcy, then you may want to consider chapter 13 instead.
If you're not sure about what type of bankruptcy you should file or how to make your bankruptcy go more smoothly, contact an attorney before doing anything. Reynolds Law Firm can help you with the bankruptcy process. Contact us today to set up a consultation.
Lanett Office
116 N. Lanier Ave
Lanett, AL 36863
Phone: 334-644-3042
Toll Free: 800-644-4413
Alexander City Office
149 Main St.
Alexander City, AL 35010
Phone: 256-329-1333
Toll Free: 877-329-1331
Mailing Address
P.O. Box 367
Lanett, AL 36863-0367
Fax: 334-644-3043
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