Alabama residents can choose from a variety of debt relief programs. The most common debt relief options in Alabama include: 

Debt Settlement

A process where debt is negotiated for less than the amount owed. This can be done by the debtor or a company on behalf of the debtor. 

Debt Management

A process where a lower interest rate and monthly payment is negotiated but the full amount of debt is repaid. This is usually debt through a non-profit credit counseling agency. 

Debt Consolidation

A process where a loan is taken out with a lower interest rate than what the debtor is currently paying. This is done through a bank or lending company. 

Whether or not a debt relief program is a good idea depends on a few factors. Not all companies offering debt relief programs are legit, so you’ll have to research their credentials before signing up for a program. Legitimate companies will have proper accreditations and usually good customer reviews. 

Be sure to compare what debt relief companies in Alabama have to offer before doing business with them. Any company demanding upfront fees should raise a red flag so be cautious moving forward.

About Alabama Debt Collection

When a person fails to pay their credit card debts in the state of Alabama, credit card companies and/or banks will eventually close the account(s) after several months of non-received payments. At this point the bank may turn the account over to a collection agency to try to recoup the debt owed.

The State of Alabama functions under the Fair Debt Collections Practices Act (FDCPA) enforced by the FTC. In addition, they have their state law, the Ala. Code §40-12-80, that debt collectors must abide by. It says collectors should file for a special license that will allow them to collect debts from consumers. This includes payment of a license tax based on where they practice their business. “Debt collectors”, as specified under this law is based on the definition provided by the FDCPA.

Any debtor or consumer who feels that the creditor and/or collection agency is not following the law can file a complaint. They can contact the Alabama State Attorney General through the Consumer Affairs Division (334) 242-7300 or (800) 392-5658.

In Alabama, the statute of limitations provided under Code Section 6-2-34 is six (6) years. An action must be taken within three (3) years for an open account or unliquidated account. After this period of time has expired without the creditor taking legal action, they will no longer be able to file a legal claim in an attempt to collect the debt. 

Debt collectors must follow Alabama Code §40-12-80 which forces debt collections to obtain a special license to try to recoup debt from consumers. Debt collection policies operate under the Fair Debt Collections Practices Act that is enforced by the FTC. 

If you feel like a debt collector is acting outside the legal limitations set up with the Fair Debt Collections Practices Act, you can file a complaint against the agency or creditor by contacting the Alabama State Attorney General’s office.

Alabama debt relief and your credit score

Depending on the type of debt relief program a creditor chooses will determine the affect on their credit score. 

For instance, debt management plans work with creditors usually through credit counselors to pay back debt in full which helps preserve a good credit score. 

While bankruptcies will have a devastating affect on a credit score and will take many years to recover. 

Debt Settlement plans work by negotiating a lower payback amount with the creditor. Through this process all accounts are closed with the creditor which will have a negative affect on a credit rating but once the plan is completed, credit scores can improve quickly as credit is rebuilt.