Many people have been convinced that the bankruptcy reforms that went into effect in October of 2005 have made it impossible for most people to file Chapter 7 bankruptcies. Nothing could be further from the truth. Yes, there is now a “Means Test” which was intended to screen out people with “too much income.” But, in my experience almost everyone whom I have counseled with regarding filing a Chapter 7 bankruptcy who could have filed for Chapter 7 bankruptcy before the 2005 reforms still qualify to file a Chapter 7 bankruptcy in Alabama after the reforms. Nationwide studies have confirmed this -- Porter Study Finds Bankruptcy Law Reform Has Hurt the Poor Most and Bankruptcy Reform’s Impact: Where Are All the “Deadbeats”?
How does the “Means Test” work? First you see if you are over or under the median income for a family of your size in Alabama. For a quick check click here. If your household income is under the median income for the same size household in Alabama, then you have passed the “Means Test” and qualify to file a Chapter 7.
If you are over the median income, it DOES NOT mean you are disqualified from filing a Chapter 7 bankruptcy. Most people can still file. There is just more paperwork to do. With the additional paperwork you are allowed to deduct taxes, housing costs, transportation costs, secured debt payments, medical costs, and many other costs. After deducting these costs, most people have very little income that could be used to pay unsecured creditors; and therefore, can file a Chapter 7 bankruptcy.
The bottom line is, if you are having financial problems, do not let the “Means Test” scare you away from seeking good legal advice from a qualified bankruptcy attorney. The qualifications to file a Chapter 7 bankruptcy in Alabama are still fairly low. Despite anything you may have heard, there is a very high chance you can still file a Chapter 7 bankruptcy. And, if you are one of the few who cannot file a Chapter 7, you can probably file a Chapter 13 bankruptcy and still be protected from creditors.
Filing for bankruptcy is a heart wrenching decision. On the one hand you want to do what you promised your creditors you would do, but on the other hand you have to house, feed, and clothe your family and yourself. There is no question that bankruptcy should be the last resort, but as to whether you should file or not, my classic lawyer answer is “It depends.”
First, we need to look at why you are considering filing bankruptcy. The most common reasons are the following:
If your answer to any of these questions is “Yes”, then it may be a good time to see an Alabama bankruptcy attorney. This does not necessarily mean you should file bankruptcy, but it does mean you may need some legal advice. The attorney may suggest some of the following alternatives to bankruptcy:
If any of these alternatives allow the possibility of a LONG TERM solution, then they should be greatly considered even though it may call for tough decisions and hard work. Why? Although bankruptcy can be a “quick fix”, it comes with some serious long term consequences to your financial future.
The bottom line is I and many other Alabama bankruptcy attorneys offer free initial consultations, so it will not cost you anything to see what your options are. If after talking to an attorney, you think you can dig yourself out of the hole you are in without bankruptcy then definitely try that. But, if it does not work out you will be prepared and should have a plan.
If you have further questions regarding this or other Alabama bankruptcy, debt, or budgeting questions please email me.
I am an attorney located in Cullman, AL. I practice extensively in the area of consumer bankruptcy law, that is, I file Chapter 7 and Chapter 13 bankruptcies for individuals. I handle cases all over North Alabama and have helped hundreds of clients through the bankruptcy process., I receive many referrals from former clients and their families and other attorneys. Why? Unlike other firms, I have a local office. If you are from out of town, we have the technology available to keep your traveling to a minimum. Also, unlike many firms, you will meet personally with an attorney, not a paralegal. An attorney will handle your case from start to finish. ,