Means Testing

• The first step in filing Chapter 7 in Alabama is to determine whether you qualify using the means test. The means test compares your median income for the previous six months against the median income for your family size. As of 2010, Alabama allows single earners a maximum median income of $38,278, according to the U.S. Trustee Program. A family of four is allowed a maximum median income of $65,079, with a $7,500 increase for each additional family member. If your median income exceeds the amount for your family size, you may have to consider filing Chapter 13.
  
  

Filing

• Chapter 7 bankruptcy petitions can be filed in the Northern, Southern or Middle District courts, depending on where you live in Alabama. Six months prior to filing, you must complete a court-approved credit counseling course. At the time you file, you must also pay the appropriate filing fees. As of 2010, a Chapter 7 case costs $299 to file, according to U.S. Courts. Within 14 days, you are required to submit to the court a complete list of your debts and assets as well as a statement of financial affairs.
  
  

Exemptions

• Alabama state law requires you to be a resident for at least two years to take advantage of exemption limits. According to The Bankruptcy Site, residents can claim a homestead exemption of up to $5,000. The homestead exemption applies specifically to the interest you have in your home's equity. You can also exempt one burial plot, a church pew or seat, clothing, books, family portraits and up to $3,000 of any other personal property. Exemptions also apply to 75% of unpaid wages, tax-exempt retirement accounts, health savings accounts, unemployment and workers' compensation.
  
  

Discharge

• Approximately 45 days after filing, you are required to attend a course in financial management. In Alabama, you cannot obtain a discharge without meeting this requirement. Approximately 20 to 40 days after filing, you are also required to attend a meeting of creditors. This meeting is conducted by the bankruptcy trustee, who is responsible for overseeing your case. At this time, the trustee may collect your nonexempt assets for liquidation and distribution to your creditors. Your Chapter 7 filing is typically discharged within 2 to 3 months following the meeting of creditors.
  
  

Considerations

• You are not required to be represented by an attorney to file bankruptcy in Alabama, but it is advisable to seek the advice of counsel. A Chapter 7 bankruptcy will remain on your credit for up to ten years following discharge.
  
  If you have assets that you wish to keep in excess of the allowable exemptions, you may need to consider using federal exemptions or claiming Chapter 13 instead. In a Chapter 13 bankruptcy, you repay your debts over a 3 to 5 year period and retain your assets.