Turbo Takeaways
- A significant share of Alabama households struggle with debt driven by low wages, large bills, and rising interest costs.
- Yellowhammer State residents have several paths to manage and reduce overwhelming balances.
- Choosing the right debt relief program can help break the cycle and restore financial stability.
Your Options To Get Out of Debt in Alabama
Even though it’s a sweet home, many Alabama residents struggle with debt. With 16% of the state’s population living in poverty, some consumers are trapped in a cycle of debt from low wages, large bills, and high-interest charges.
Yellowhammer State residents need solutions to manage overwhelming debt. Thankfully, there are multiple options for reducing and paying off large balances.
Keep reading to discover more about debt relief programs in Alabama that can help you break free from the endless cycle of debt.
Credit Counseling
Credit counseling programs are a good way for Alabama residents to start addressing financial concerns with the help of a professional.
How It Works
Alabama residents who opt for this program can work with a certified credit counselor to explore their credit history. They also have the opportunity to participate in financial education courses on topics such as budgeting and understanding what factors impact their credit scores.
Pros
- Low-cost way to understand your full financial picture
- Provides guidance on budgeting and credit habits
- Helps you map out next steps before choosing a relief strategy
Cons
- Does not reduce or eliminate existing debt balances
- Some programs require time-consuming education courses
- Offers planning but no direct intervention with creditors
Cost
Credit counseling programs typically offer services for a small fee. Low-income residents may even qualify for free services.
Stats
- Although credit counseling offers practical solutions for preventing debt, in the past decade, more consumers have chosen to resolve large balances through debt settlement programs.
Resources
Find a credit counseling program in Alabama through the Financial Counseling Association of America.
Debt Management
Alabama residents can work to pay off multiple debt balances at once using debt management.
How It Works
Alabamians can set up a debt management plan (DMP) through a credit counseling agency or private debt management organization, creating a monthly payment schedule for unsecured debts.
Pros
- Can reduce interest rates and waive certain fees
- Creates a structured single monthly payment
- Helps prevent missed payments through organized repayment
Cons
- Requires closing most or all credit card accounts
- Monthly program fees add to overall cost
- Full repayment still required, just reorganized
Cost
Debt management programs charge a small start-up fee with modest monthly fees for each account you’re paying off through the plan.
Stats
- Alabama residents carry an average total consumer debt of $77,981.
- This amount includes mortgage debt, automobile loans, student loans, credit card debt, and other secured and unsecured personal loans.
Resources
Learn more about debt management programs from the TurboDebt® resource library.
Debt Consolidation
Some Yellowhammer State residents with multiple debts consolidate those balances into a single monthly payment.
How It Works
Alabamians can take out a fixed-rate, low-interest consolidation loan from a bank or credit union to reduce their interest rates and restructure debt payments.
Another option is to open a zero-interest balance transfer credit card and transfer your outstanding credit card balance to the new card during the initial promotional period after the card is opened.
Pros
- Simplifies multiple bills into one fixed payment
- Potential for lower interest rates with strong credit
- Zero-interest balance transfer cards offer temporary relief
Cons
- Requires fair to good credit to qualify for better rates
- Can become more expensive if repayment stretches too long
- High APR kicks in if balances aren’t paid before promo ends
Cost
Consolidation loans will cost you the total principal amount of all the debts you plan to pay off plus your new interest payment.
A balance transfer card may charge a balance transfer fee of up to 5% of any balance(s) you move over to your new card. Additionally, you may incur higher interest rates, with APRs as high as 29.99%, on transferred balances after the introductory period ends. So it’s best to read your credit card application’s terms and conditions carefully.
Stats
- Alabama consumers carry an average credit score of 685, one of the lowest in the country. This could make securing a loan at a lower interest rate difficult for some residents.
Resources
Read more about the pros and cons of a debt consolidation loan to decide if it’s the right debt relief option for you.
Debt Settlement
Settling debt is an effective way to pay off large unsecured balances from medical bills, credit cards, and personal loans.
How It Works
Alabama residents can contact creditors on their own or leverage the expertise of a debt settlement organization to negotiate for a reduced balance.
When you work with an organization, you’ll set up a savings account to collect enough money to pay off a portion of your debt via a lump-sum payment your lender agrees to.
Pros
- Can reduce total unsecured balances by up to 50%
- Faster path to payoff compared to long-term repayment plans
- Legitimate settlement companies do not charge upfront fees
Cons
- Requires pausing payments, which harms credit scores
- Settlement is not guaranteed with every creditor
- Makes it harder to qualify for new loans and credit lines while rebuilding credit
Cost
Debt settlement doesn’t cost anything up front. However, once the debt settlement company negotiates an acceptable agreement with your creditors, you’ll owe fees to the organization for doing so.
For most debt settlement firms, these fees typically run between 15% and 25% of your total enrolled debt.
Stats
- Many consumers who choose debt settlement carry large credit card balances.
- In Alabama, the average citizen owes $5,765 in credit card debt.
Resources
Learn more about debt settlement programs and how they help you get out of debt.
Bankruptcy
Bankruptcy is a final option for resolving debts. Declaring bankruptcy involves a rigorous legal process and arbitration from a judge who decides how you should pay back your creditors.
How It Works
Alabama residents file with their regional bankruptcy court. Most consumers file either Chapter 7 or Chapter 13 bankruptcy. It’s a good idea to consult with a bankruptcy attorney before you begin the process.
Pros
- Can discharge many unsecured debts
- Court-supervised structure protects you from collections
Cons
- Negatively impacts your credit history for up to 10 years
- May involve the need to sell assets
- Legal and court fees can be substantial
Cost
Bankruptcy costs vary depending on how much you owe in debt. However, attorney fees can often range up to $5,000. You’ll also pay court fees as stipulated by the state of Alabama.
Stats
- In 2024, a total of 19,124 residents of Alabama filed for bankruptcy (PDF).
Resources
Keep reading to discover what happens next after you file for bankruptcy.
What You Need To Know About Debt in Alabama
Statute of Limitations on Debt Collections in Alabama
Alabama’s Statute of Limitations governs how long a creditor can take legal action against a consumer for not paying a debt. Open-ended “revolving balance” accounts like credit cards have a shorter timeframe than most other types of debt, like a mortgage or auto loan (promissory note) or an unsecured loan (written contract) with a fixed repayment term.
Here’s a look at Alabama’s Statutes:
| Type of Debt Agreement | Length of Time Collectible |
|---|---|
| Written Contracts | 6 years |
| Promissory Notes | 6 years |
| Open-Ended Agreements | 3 years |
| Oral Agreements | 6 years |
Statute of Limitations on Medical Debt in Alabama
In Alabama, the Statute of Limitations on medical debt lasts six years. This means that creditors can take legal action against consumers for not paying healthcare bills for up to six years after a bill is due.
Student Loan Forgiveness in Alabama
Although the Yellowhammer State doesn’t offer a general loan forgiveness program, Alabama does provide help to nursing school graduates through the Advanced Practice Nursing Loan Repayment Program. The program offers up to $15,000 to qualified nurses who pursue advanced positions such as nurse anesthetists.
Alabama state employees may also qualify for loan forgiveness through the Public Service Loan Forgiveness Program.
Resources for Financial Assistance in Alabama
While Alabama doesn’t offer specific debt relief programs, the state does provide financial assistance and resources to its citizens.
Although Alabama stimulus checks are over, there are still opportunities for those facing financial hardship to get the help they need through the state.
- Alabama Medicaid: Alabama offers health care assistance to over one million qualifying citizens. Programs serve families, pregnant women, the elderly, youth, veterans, and disabled citizens.
- Family Assistance Program: Alabama’s Family Assistance Program, a part of the federal Temporary Assistance for Needy Families program, provides cash aid to qualifying families.
- Alabama JOBS Program: JOBS operates in all 67 Alabama counties, offering services and work support for parents receiving cash assistance.
- Food Assistance: Alabama administers food assistance to low-income households through the federal Supplemental Nutrition Assistance Program.
Get Professional Help Paying Off Your Debt
When you’re stuck in a cycle of debt from revolving balances, late fees, and interest payments, it can be challenging to get out without help.
“It’s important to note, each person’s situation is unique and specific to their assets, income, living expenses, and most importantly, the amount and type of debt they’re carrying,” shares Brad Reichert, a debt expert and the founder and managing director of Reichert Asset Management LLC.
“What may work for one person may not be the best option for another person. It’s best to reach out for a complimentary consultation with a certified credit counselor or other knowledgeable debt expert to get advice and guidance on the best course of action for your situation,” Reichert advises.
TurboDebt® provides consumers with options to break the debt cycle, offering support and customized solutions through tailored debt relief plans. We’ve already helped thousands of Alabamians save an average of 56% of their total debt balances.
Here are some other reasons to work with us:
- Thousands of 5-star TurboDebt reviews on Trustpilot and Google
- Up to 50% or more in savings on your total debt balance (before fees) when choosing debt settlement
- No upfront fees
- Flexible payment schedule
Contact us today to find out if you qualify for debt relief through TurboDebt. It only takes a few minutes to get the help you need to overcome debt and start living a life of financial freedom.