By Attorney Raven Beach
Life happens fast. Out of nowhere, you can find yourself with medical debt, credit card bills, losing your job, or any personal crisis. Before you know it, there is too much debt and too little income. A last resort for relief can be found by filing for bankruptcy.
Bankruptcy helps people who cannot afford to pay their debts get a fresh start; the most commonly used are Chapter 7 and Chapter 13. In these cases, most debts can be relieved, or the debt can be reorganized for the benefit of people owed money, also known as creditors.
Twenty years ago, it was much easier to file for bankruptcy and obtain a discharge of debts by filing for a Chapter 7 bankruptcy. However, in April 2005, President Bush signed the Bankruptcy Abuse Prevention and Consumer Act (BACPA) into law to prevent abuse of the bankruptcy system. Under the new law, it must be determined if the debtor can repay a portion of their debts, which is known as the means test. As of 2025, in Alabama, a household of one is generally ineligible if its income exceeds $ 60,786. A household of two is generally ineligible if its income exceeds $72,639. The limit on income increases with the number of household members and is individually evaluated. People who exceed the means test income under the more restrictive Chapter 7 guidelines are encouraged to file for Chapter 13.
The revised code also has an educational component. Debtors must pass credit counseling and debtor education course, A credit counseling course helps individuals better understand where they stand financially, explore alternatives to bankruptcy, and assist in budgeting. The financial management course teaches financial skills, money management, and rebuilding sustainably post-bankruptcy. The courses are required regardless of the bankruptcy relief sought.
In conclusion, bankruptcy significantly affects your credit score and credit report and appears in your credit file for up to 10 years. However, stopping wage garnishments, foreclosures, and medical debt could be worth the relief.
CONTACT INFO.
Raven Perry-Beach, Esq.
107 Jefferson St.
Suite 14
Huntsville, AL 35801
(256) 799-0292
* Licensed in Alabama, Tennessee, Massachusetts, and DC
NO CLIENT RELATIONSHIP: Communication with an attorney does not by itself create an attorney-client relationship or constitute the provision or receipt of legal advice. Any communication from this office should be considered informational only, and should not be relied or acted upon until a formal attorney-client relationship is established by written agreement.