The state of Alabama does not utilize the county median as the income value for the means tests in bankruptcy cases. Instead, the courts use an income chart based on the household size. For chapter 7, the income level is lower than this median, but holds further stipulations. To qualify for chapter 13, the consumer’s income is higher than the median, and they are able to utilize a majority of their income to pay off debts. Any consumer who wishes to file a claim should consult with the Courtney & Mann LLP.
Qualifying for Chapter 7
Chapter 7 bankruptcy offers the opportunity to settle debts through liquidation. This implies that the consumer possesses enough assets to generate funds to pay off debts. However, to qualify for this chapter, the consumer must fall within a specific range. According to Alabama law, the consumer’s income should not exceed $7,475 within a five-year period the consumer qualifies automatically for this chapter of bankruptcy. Alternately, any consumer who has a disposable income that exceeds $12,475 is ineligible for chapter 7.
Higher-income levels, typically, eliminate the option to file chapter 7 and require the consumer to pass the means test for chapter 13. The assumption is that consumers with income levels that exceed the median for their household may have the means to pay off their debts without court involvement. The court may suggest lifestyle changes or credit counseling instead of bankruptcy for these consumers. An assessment of the consumer’s income to debt ratio determines whether bankruptcy is required to settle debts.
Qualifying for Chapter 13
In Alabama, consumers who wish to file a chapter 13 claim have met the means test and have a three to five-year plan for their case. The plan includes debts that he or she intends to pay off or reduce while in bankruptcy. During chapter 13, all disposable income is utilized to pay off debts. The consumer must present information about any household expenses that are allowed as exemptions. A Bankruptcy Attorney in Tallassee, AL can explain which options are eligible.
