For anyone thinking of filing personal bankruptcy in the "heart of Dixie", as Alabama is affectionately nicknamed by its residents, this information is for you.
In Alabama (as well as the other 49 states), the two types of bankruptcy commonly filed by individuals are Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy proceeding, a court-appointed bankruptcy administrator takes possession of any nonexempt assets, sells them, and then uses the proceeds to pay creditors. The discharge is generally entered a few months after the petition is filed.
In a Chapter 13 bankruptcy proceeding, the individual filing bankruptcy proposes a plan to repay debts over a three to five year period. This plan must be approved by the Court, and plan payments are paid to the bankruptcy administrator, who then disburses the payments to creditors based on the terms of the approved plan. The discharge is not granted until the conclusion of the repayment plan.
If given a choice between Chapter 7 and Chapter 13, most people will pick Chapter 7 because it requires no repayment of debts and is over much quicker. However, bankruptcy laws enacted in 2005 place conditions on who can actually file a Chapter 7 bankruptcy petition, which brings us to...
Alabama Bankruptcy Fact #1
The bankruptcy laws enacted in 2005 impose a means test to determine if a person can file Chapter 7 bankruptcy. There are two ways to pass this means test.
The first way is to compare the household income of the person filing to the state median income. The annual income, calculated using the average gross income for the six-month period prior to filing, must be below the state median. Currently, the median income for a family of four in Alabama is $55,424.
If household income exceeds the median, a person can still file Chapter 7, based on the results of a means test calculation. Bankruptcy Form 22A is used for this calculation.
Additional information regarding the bankruptcy means test can be found on the U.S. Trustee Program's Website at http://www.usdoj.gov/ust.
Alabama Bankruptcy Fact #2
As stated earlier, the bankruptcy administrator in a Chapter 7 proceeding will take possession of nonexempt assets and liquidate them in order to pay creditors. The next obvious question - what exactly is exempt in Alabama?
Unfortunately, the answer is "not much". As of this writing, Alabama allows a $5,000 homestead exemption and a $3,000 personal property exemption. If the homestead is jointly owned by a husband and wife, each may separately claim the homestead exemption. There are other exemptions, and the laws may change at any time, so make sure you consult an attorney before you file bankruptcy, which brings us to...
Alabama Bankruptcy Fact #3
Many people who file bankruptcy without counsel do so because of the belief that they cannot afford an attorney. Truth is, bankruptcy is a complicated legal matter and you can't afford not to have an attorney. In addition, for those who really can't afford a lawyer, there are sources of free help. It's just a matter of tracking it down.
Start by calling your local bar association. They will be able to refer you to local attorneys and organizations that may be able to help you. If your local bar is unable to help, contact the Alabama Bar. Their contact information is available at http://www.alabar.org.
About the Author
Dawn Hall is a freelance writer who worked as an assistant to a Chapter 7 bankruptcy trustee. She is currently developing a free online Chapter 7 bankruptcy resource guide. Visit her website for more information regarding Alabama bankruptcy.
Many people are under the impression that bankruptcy and student loans go together. When faced with outrageous prices for education it would seem that it would be an answer to many seeking relief. However, they do not mix and it is extremely difficult to have them discharged in a bankruptcy court.
Interestingly, in the 1970's it became common practice for someone to attend school and then file bankruptcy and student loans would disappear. It was a sure way to get a free education. Of course, as these cases grew, the government decided to limit the availability of this option. It became increasingly difficult to file for bankruptcy right after school. The common practice was now to wait at least seven years so the loan would be old. In order to file a person simply had to show that they had made their first payment seven years prior and that the loan was causing undue hardship. It was easy to prove the benefits of filing for bankruptcy.
In October 1998, the issue of bankruptcy and student loans again came to the forefront. The court ruled that such a case could not be filed and discharged unless three criteria were met. A person could not open a case unless they met this criterion. The first of these criteria is that you must prove to the court that you cannot keep up with your payment schedule. The second criterion is that you must prove to the court is that you are unable to pay in the future and that your financial situation is permanent. The third and final criterion is that you have made a good-faith effort to pay them back. If and only if you meet all of these criterions, may you open and file a bankruptcy and student loans case.
Even if you meet all of the requirements for opening a bankruptcy and student loans case, there is no guarantee that your loans will be discharged. It will depend on the judge that is hearing your case. Some judges will discharge some of the loans and leave you to pay part of them. Some judges will hear your case and will not discharge any of your loans. Once in awhile, a judge will take your particular case under advisement and discharge everything. This is extremely rare, but it is possible. It is not easy work to get a bankruptcy and student loans case discharged!
When you pursue your education, act responsibly and think before you apply for a student loan. Without foresight into your future, you could find yourself filing a bankruptcy and student loans case and damage the very future you have been working so hard to achieve.
Student Loan Consolidation Reduces Monthly Outgoings When It Matters by John Mailer
Student loan consolidation provides students with many benefits even if they are making current monthly payments and not experiencing any difficulty doing so. Students can make their monthly bill payments a lot simpler with a student loan payment to a single lender, and the rate on Federal Consolidation Loans are fixed during the lifetime of the loan.
Ease the Pressure on Your Monthly Budget
By consolidating loans, students will be able to ease the pressure on their monthly budget by 10 to 60 per cent reduction in their monthly budget. In fact, students could also save money by using their student loan payment savings to pay off their credit card debts, and consolidation will also help the students' credit scores as well as debt-to-equity ratio.
No doubt, expanding the repayment period may result in added total interest payments, but there are no prepayment penalties for faster repayment and thus allows students to pay off the loan in a shorter time frame, and hence save on total interest payments. The interest rate may be calculated by taking the weighted average of the interest rates on each loan that is to be consolidated, and then rounding off to the nearest eighth of 1 or 8.25 per cent, whichever is less.
Though one may need to consult a tax advisor, usually student loan consolidation allows students to deduct tax paid on Federal Consolidation Loans. Student loan consolidation will help the student to lock in a lower rate of interest as well as provides for many other incentive features.
Student loan consolidation is the easiest way to reduce student and school loan debt, and it results in lowered debt as well as payments in case the average interest after consolidation is less than it was before. One can think of it as being refinancing one or a group of federal student loans at reduced rates of interest and it is much like refinancing a mortgage loan at a reduced interest rate that would lessen monthly payments as well as the total amount paid.
The student loan consolidation program will let a borrower combine outstanding student loans and by consolidating loans through a student loan consolidation program there are three benefits to be enjoyed. The first one is that it is very convenient since all loan payments are clubbed into one payment and thus there is less paper work and fewer due dates. Secondly, it will save money for the student since after consolidation only one payment is required which normally is less than combined payments for all loans paid individually.
The third benefit of having student loan consolidation is that it can open up more opportunities for students in the form of new deferment choices and/or added repayment potential. With added flexibility, the student may be able continue pursuing further education and face lesser financial hardships.
About the Author
John Mailer's articles look at students financial problems and the best student loans consolidation ideas using private student loans. His other site is about the thrills of whitewater rafting
I was speaking in the office break room with our director of student loan consolidation, Jon Rudy, about how we’re marketing our federal and private student loan consolidation products. We’re in agreement, as we frequently are, that student loan consolidation has a vital role in the education finance process. Where I think a lot of student loan companies get hung up is on the idea of saving money for students. Student loan consolidation does not save you money over the long term if you only make the minimum payment, because at the bare minimum payment, you’ll be paying off your loan longer.
Think of it this way. If you rent an apartment, over a period of time, you’ll pay a certain amount for rent. If you rent that apartment longer, it costs you more money. If you rent a smaller apartment for longer, it will still probably cost you more money than a larger apartment for less time.
A loan is nothing more than a money rental. You’re renting money from a lender, and the interest you pay is the rent.
What student loan consolidation does is agree to reduce your rent, trading off with renting the money for a longer period of time, if you make the minimum payment.
Our perspective as a company is that students just out of school need to take a few years to get on their feet in their careers and personal finances. During that time period, a reduced monthly payment is just the thing they need. After a few years, when presumably they’re making good use of their education and degree, we strongly recommend that students step up and make more than the minimum payment, ideally making a payment that’s a little larger than the original, unconsolidated loan payment.
Because there are no early repayment penalties, they can effectively get on their feet financially and then be done with the loan in the same amount of time as if they hadn’t consolidated.
Does student loan consolidation save you money? Not necessarily. Does it reduce your monthly payment? Yes, absolutely. But more than anything else, student loan consolidation helps to buy you some time in the first years after school.