Alabama residents have an average personal debt of $67,670, including mortgage debt or student loans. That’s the ninth-highest total in the U.S. Although it’s not the country’s highest, many Alabama residents struggle to repay their debts. If you’re one of them, here’s everything you need to know to become debt-free.
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How to Become Debt-Free in Alabama
Here is a look at each of the four primary debt relief options to help you determine what works best for your situation:
1. Debt Consolidation Loan
Works best for: People with 670+ credit scores
Debt consolidation loans involve using a new, larger loan to pay off your other unsecured debts, including credit cards. A debt consolidation loan should typically have a lower interest rate than your current debts to be effective.
This leaves you with one monthly payment and one creditor, saving money and simplifying your payments.
READ MORE: How to consolidate your credit card debt
2. Debt Consolidation Company / Debt Consolidation Program
Works best for: Anyone with more than $10,000 in unsecured debt who is struggling to make their payments and wants to avoid bankruptcy.
Debt settlement involves negotiating with creditors to repay less than the total amount they owe, sometimes as a lump sum and sometimes as a longer-term payment plan.
In Alabama, debt settlement can help you pay off different forms of consumer debts, including:
- Credit cards/lines of credit
- Personal loans
- Department store cards
- Old judgments
- Student loans in default
- Other unsecured loans or debts
To make debt settlement work, you must stop paying your debts for three to six months until your creditor charges off the debt. This will damage your credit score but will incentivize the creditors to negotiate. Once settlements are reached, and payments are made, your credit score will rebound.
Pro tip: The average debt settlement customer ends up debt-free while paying about 75% to 80% of the total enrolled in the program after all fees are paid.
READ MORE: Is debt settlement the fastest way to get out of debt?
Debt Settlement Risks
- Your creditors aren’t obligated to settle
- If a creditor refuses to settle, you could end up having to pay accrued interest and late fees
- Missed payments will show up on your credit report
- You may have to report the forgiven amount as income tax to the IRS
Alabama Debt Consolidation Companies
Looking for a debt consolidation agency in Alabama to help you get a handle on debts? Here are a few firms that could help:
Best Overall: DebtHammer
DebtHammer helps borrowers who are overwhelmed by unsecured debts ranging from payday loans and tribal loans to credit cards and medical bills.
After a free consultation to review your situation, the DebtHammer representative will offer you a menu of options. You will decide on the course of action you prefer. These options may include debt settlement, debt consolidation, bankruptcy or others. DebtHammer requires a minimum debt of $7,500 for program enrollment, or $1,000 in payday loans. The company charges 25% of the total enrolled debt.
READ MORE: DebtHammer review
Though based in Texas, DebtHammer currently provides solutions to residents of Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Illinois, Kansas, Louisiana, Maine, Massachusetts, Michigan, Montana, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas, Virginia, West Virginia and Wyoming. Some service options may not be available in all states.
Click here to schedule a free consultation.
More Debt Relief Companies
- Debt Negotiation Services Debt Settlement Company: Boynton Beach, CA (561) 964-6404 thednsway.com
- Alleviate Financial Solutions 4 Park Plaza Suite 1500, Irvine, CA 92614 (800) 308-2935 alleviatefinancial.com
- Guardian Litigation Group: 17922 Fitch Suite 150, Irvine, CA 92614 (949) 312-4226 guardianlit.com
- New Era Debt Solutions: 330 Wood Rd., Suite B Camarillo, CA 93010 (805) 303-8773 neweradebtsolutions.com
- Global DS 675 W Indiantown Rd. Jupiter, FL 33458-7555, (866) 677-5044 globaldsgroup.com
- InCharge Debt Solutions: Orlando, FL (800) 565-8953 incharge.org
- Golden Financial Services Debt Settlement Corporation: Lake Worth, FL, (619) 600-5189 goldenfs.org
- National Debt Relief 180 Maiden Ln 30th floor, New York, NY 10038 (800) 300-9550 nationaldebtrelief.com
- DebtBlue: 1125 E Campbell Rd Suite 200, Richardson, TX 75081 (855) 269-9462 try.debtblue.com
Alabama Debt Settlement Attorneys
- Cindee Dale Holmes: 2024 3rd Ave N Suite 300, Birmingham, AL 35203, (205) 254-3664
- Brock and Stout, 604 38th St S, Birmingham, AL 35222 (has multiple Alabama offices),
- (205) 502-2200; www.brockandstout.com
- Bond & Botes Law Offices: 15 Southlake Ln # 140, Hoover, AL 35244, (205) 809-7108; www.bondnbotes.com
- Padgett & Robertson: 4317 Downtowner Loop N, Mobile, AL 36609, (251) 342-0264; www.hermandpadgett.com
- Grainger Legal Services: 4220 Carmichael Ct N, Montgomery, AL 36106, (334) 319-8234; www.graingerlegal.com
- Seal Hanson LLC: 1027 23rd St S, Birmingham, AL 35205, (205) 776-2755
- C Taylor Crockett PC: 2067 Columbiana Rd, Birmingham, AL 35216, (205) 978-3550; www.taylorcrockett.com
- Dezenberg & Smith, Attorneys At Law: 2700 Winchester Rd NE Suite G, Huntsville, AL 35811, (256) 533-5097; www.dezlaw.com
- Alabama Bankruptcy Relief Center: 2700 Corporate Dr #200, Birmingham, AL 35242, (205) 440-3113; alabamabankruptcyrelief.com
- Eric Wilson Law, LLC: 1902 8th St, Tuscaloosa, AL 35401, (205) 349-1280; ericwilsonlaw.com
- Marshall A. Entelisano, P.C.: 701 22nd Ave #2, Tuscaloosa, AL 35401, (205) 752-1202; killbillsfast.com
Eligible Debts
When seeking debt relief in Alabama, it’s important to note that not all types of debt are eligible. Debts that can be included in the state’s debt settlement programs include:
- Credit cards
- Department store cards
- Signature loans
- Personal lines of credit
- Old repossessions
- Other unsecured debts
- Old judgments
- Private student loans in default
Ineligible Debts
Debts that don’t typically qualify for debt settlement in Alabama include:
- Home mortgages
- Federal student loans
- Car loans
- Other secured debts
- Credit union debts
- Medical bills
3. Debt Management
Works best for: People with primarily credit card debt. Many credit counseling agencies work exclusively with credit card debt (and thus won’t be a help if you need to consolidate medical bills or student loans.)
A debt management program will usually reduce the interest rates on your credit cards from the current average of about 20% to somewhere around 9%. This will lower your monthly payment. However, unlike debt settlement, you will repay the full amount you owe, plus a lower amount of interest. The program usually takes 3-5 years to complete.
Pro tip: It’s important to note that only 55% to 70% of customers who enroll in DMPs successfully complete the program. If you enroll in a Debt Management Plan but don’t complete it, your financial situation could worsen.
So, for example, if you had $5,000 in credit card debt and were paying 25% interest, your monthly interest rate would be $105. If you reduce the interest to 8%, you’ll pay $33 a month in interest. That’s a $72 savings that you could apply to reducing your debt and paying it off faster.
These programs are usually set up and administered by nonprofit credit counseling agencies.
Like with debt settlement, debt management does not involve a loan. Credit scores won’t matter. But if you default on payments, your creditor could raise the interest rate back to its original amount.
READ MORE: Debt management vs. debt settlement
Credit Counseling Agencies in Alabama
- Consumer Credit Counseling Services: Birmingham, AL 35217 (has multiple locations statewide), (205) 841-6876; consumercredit.com
- Superior Credit Repair Restoration: 1 Perimeter Park S Suite 100 N, Birmingham, AL 35243,
- (205) 587-0456; superiorcreditrepaironline.com
- Debt Hero: 2100 Southbridge Pkwy, Birmingham, AL 35209, (205) 623-0015
- Better Day Consulting & Credit Repair: 11 N Water St Suite 10290, Mobile, AL 36602, (251) 325-6664; creditconsult.betterdayconsulting.com
- CFS Global: 4614 US-280 #1135, Birmingham, AL 35242, (888) 850-2374; 850cfsglobal.com
4. Bankruptcy
Works best for: People who can see no other way to get out of debt within the next five years, who’ve already suffered significant credit score damage or who’ve tried one or more of the other options and failed.
Bankruptcy may sound like the nuclear option, but it can often mean a second chance and a fresh start. And you can get your financial situation in order without losing valuable possessions, like your home or car.
There are two types of bankruptcy:
- Chapter 7: Your non-exempt assets are liquidated by a court-appointed trustee and the money is used to repay your debts. Some assets are exempt, including Social Security, your home, pensions and your car.
- Chapter 13: You keep your assets but are on a payment plan to make regular payments toward your debt. All of the repayments go through your bankruptcy trustee.
Bankruptcy will stay on your credit report for seven to ten years and could knock your credit score down by as much as 200 points.
However, that does not mean you won’t be able to borrow money for that entire period. As years pass, lenders will be more forgiving and you’ll have a better shot at loan approval.
READ MORE: Types of bankruptcy explained
Statute of Limitations on Debt in Alabama: 3 or 6 years
The statute of limitations is the amount of time a creditor can take you to court in an effort to collect unpaid debts. This period begins as soon as you miss the initial payment on a debt that’s due.
In Alabama, credit card bills and other open-ended lines of credit have a three-year limit, while all other time-barred debts (such as medical bills) expire after six years.
After the statute of limitations expires, the debt becomes “time-barred.” This means the original creditor can no longer collect on it. At this point, the court can’t order you to repay the debt either. Debt collectors also can’t garnish your wages or place a lien on your car or home.
You’ll still legally owe these debts. Also, debt collectors can still contact you via phone or letter to try to get you to pay.
Debt Collection Laws in Alabama
Alabama residents are protected by the federal Fair Debt Collection Practices Act, which limits how and when debt collectors can contact you and places other restrictions on debt collection efforts.
Aside from that federal law, the state ranks among the worst in the U.S. for legal protections for debtors.
Alabama state laws allow creditors and debt collectors to seize bank accounts, personal property, cars and even homes, according to a report from the National Consumer Law Center, which awarded the state a D grade.
Under the FDCPA, neither creditors nor debt collectors can:
- Use deceptive, abusive, fraudulent, or manipulative tactics to collect debts.
- Use force or violence to get borrowers to pay their debts
- Contact a borrower’s employer about a past-due account unless a prior agreement was made, or they have a judgment
- Sell or otherwise disclose private information to a third-party agency
- Harass borrowers at home or work about the debt
- Contact borrowers outside of standard business hours (9:00 p.m. to 8:00 a.m.) without consent
- Intentionally misrepresent information
You have the right to contact a debt collector and tell them to stop contacting you, but it must be done in writing.
Debt collectors and creditors must also provide written notification with details relating to the debt within five days of contacting the borrower. If you’ve been contacted about a debt you might not owe, you have 30 days to dispute it with a debt verification letter. In the letter, write that you don’t owe the debt and that they must provide written proof before anything else happens.
Where to Make a Complaint in Alabama
The best place to register a complaint about illegal activity or harassment is the Consumer Complaint division of the Alabama Attorney General’s Office. You can do this by completing an online form.
Official website: https://www.alabamaag.gov/consumer-complaint/
Note that you may be asked to provide additional supporting documentation via email.
You can also file a complaint with the Consumer Federal Protection Bureau (CFPB). The CFPB is a federal organization that enforces federal consumer financial law to foster fair, transparent practices.
More Debt Statistics in Alabama
The average consumer debt in Alabama is $67,670, including mortgage debt or student loans. That’s the ninth-highest total in the U.S. This includes personal debts, including credit cards, personal loans, auto loans and payday loans.
| Alabama average | National average | |
| Average salary | $50,620 | $59,428 |
| Median household income | $54,593 | $70,784 |
| Per capita household income | $50,637 | $36,430 |
| Unemployment | 2.1% | 3.5% |
| Household debt | $64,310 | $59,580 |
| Auto loan debt | $5,660 | $5,470 |
| Credit card debt | $5,900 | $3,480 |
| Mortgage debt | $26,840 | $41,830 |
| Median mortgage payment (30-year fixed) | $1,223 | $2,823 |
| Average student loan debt | $37,137 | $37,338 |
| FICO credit score | 691 | 714 |
| Average VantageScore | 671 | 701 |
| Retirement savings | $395,563 | $255,000 |
| Child poverty | 22.7% | 5.2% |
| Overall poverty | 16.1% | 11.6% |
| Bankruptcies over one month | 3,731 | 89,224 |
| Foreclosure starts (2022) | 4,950 | 248,170 |
| Identity thefts reported | 19,691 | 1,108,609 |
| Percentage of unbanked residents | 8.7% | 4.5% |
| Average credit utilization ratio | 29% | 31% |
Payday Lending Status in Alabama: Legal
Alabama payday loan laws limit the industry in the state, capping the allowable principal amount and interest rates.
However, lenders can still charge triple-digit annual percentage rates (APRs).
- Maximum loan amount: $500
- Maximum Interest Rate (APR): 456.25% on a 14-day, $100 loan
- Minimum loan term: 10 days
- Maximum loan term: 31 days
- Number of rollovers allowed: One
- Installment option: No
- Finance charges: 17.5% of the amount advanced
- Collection charges: $30 non-sufficient funds (NSF) fee; Court costs and an attorney’s fee up to 15% of the principal amount and finance charge
- Criminal action: Prohibited
What Happens If You Can’t Repay a Payday Loan in Alabama
You cannot face criminal charges for being unable to repay your payday loan in Alabama. However, if a lender sues you or you receive a court order and you ignore it, a warrant may be issued for your arrest, so be sure to appear in court as scheduled.
The lender may try many different ways to contact you, including phone calls, texts and letters from lawyers.
The Bureau of Loans enforces payday loan laws in Alabama. It can take steps to discipline payday lenders that violate the Alabama Deferred Presentment Services Act. This includes revoking lenders’ licenses or imposing financial penalties.
If you need to make a complaint about a payday lender in Alabama, here’s how to submit one:
- Contact the Alabama State Banking Department
- P.O. Box 4600, Montgomery, AL 36103-4600
- Phone: (334) 242-3452 or (866) 465-2279
- http://www.banking.alabama.gov/complaint.aspx
Eligible Borrowers
- Those who currently live in the state
- People who plan to move there
Pro tip: Lenders are not required to verify a borrower’s ability to repay. You enter into an agreement at your own risk.
Lenders must be licensed to legally operate in the state.
Resources for Alabama Residents Facing Hardship
Alabama offers a variety of local and state programs for residents looking for help with debt or finances. Among other things, these resources can provide low-cost or free childcare, job-related education and training, healthcare, and legal aid. Some programs can also help with the cost of rent or utilities.
Some of the main food banks in the state include:
- Community Food Bank of Central Alabama: Birmingham; (205) 942-8911
- Food Bank of North Alabama: Huntsville; (256) 539-2256
- West Alabama Food Bank: Tuscaloosa; (205) 333-5353
- Heart of Alabama Food Bank: Montgomery; (334) 263-3784
- Food Bank of East Alabama: Auburn; (334) 821-9006
- Love All Pantry at Central; Mobile; (251) 432-0591
- Community Action Partnership Of North Alabama: Decatur; (256) 355-7843
- Food Bank of North Alabama – Shoals Branch: Florence; (256) 760-5315
How to Apply for Unemployment Benefits in Alabama
To file by phone, call 866-234-5382.
You will need your social security number and the name, correct address and dates of employment for your most recent employer. You will also need a driver’s license or state issued ID card number and your mother’s maiden name. If you are separating from the military, you will need the member 4 copy of your DD214. If you are not a U.S. citizen, you must provide work authorization number.
Once your claim is filed, information about your claim is available online in the claimant portal
For questions, call (800) 361-4524 at 5 pm Sunday through Thursday to schedule a next-day callback appointment. If you are unable to secure an appointment on one day, please try again the next day. You will need to keep your phone nearby for the entire day of your scheduled appointment.
State Hardship Programs
Alabama offers many state-specific hardship programs for low-income households and people experiencing financial hardship. These include:
- Family Assistance Program: This provides temporary cash assistance for basic needs for low income families with children under age 18 (or age 19 if a full time student in a secondary school or in the equivalent level of vocational or technical training. Assistance is issued on Electronic Benefit Transfer (EBT) cards.
- The JOBS Program: This provides work and training services to all parents receiving cash assistance to help find and retain employment.
- Alabama Energy Bill Assistance Programs: The low income, elderly, disabled, and others facing financial hardship may be eligible for help paying utility bills.
- CHIP: Children’s Health Insurance Program is designed to help low-income families obtain affordable health care for their children. It includes certain services, like medicine and hospital care.
- SNAP: In Alabama, SNAP is available to help low-income households subsidize their food costs. Apply for a reloadable card and use it like you would a debit card at most grocery stores.
- TANF: This program helps low-income individuals through a monthly cash stipend that can be used to pay for basic necessities – such as food, housing, and clothing.
- WIC: The Women, Infants and Children program is designed to help certain people, including low-income women with young children, afford food costs. Most people who qualify for SNAP or TANF benefits also qualify for this program.
- LIHEAP: The Low-Income Home Energy Assistance Program is federally funded and helps income-qualified families with heating and cooling costs. It is administered by the Alabama Department of Economic and Community Affairs.
- CAFCP: The federal Child and Adult Food Care Program reimburses eligible organizations and daycare home providers for nutritious meals served in care settings. The program is administered by the U.S. Department of Agriculture.
Cost of Living in Alabama
| Annual Mean Wage (All Occupations) | $51,670 |
| Median Monthly Rent | $630 |
| Value of a Dollar | $1.15 |
| Cost of Living | 87.9 |
| Cost of Living Rank | 47 |
| Grocery Cost Index | 98.2 |
| Housing Cost Index | 70.1 |
| Utilities Cost Index | 100.7 |
| Transportation Cost Index | 92.7 |
| Miscellaneous Cost Index | 94.3 |
The Bottom Line
With a lower-than-average salaries and higher-than-average per capita debt, many Alabama residents need financial help. But the state also offers some debt relief and hardship programs to help residents, including debt settlement and debt consolidation. If you’re struggling with debt, knowing your options is essential. That way, you can start rebuilding your financial life without feeling overburdened by debt.