In a Nutshell

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. Read on to learn more about debt relief in Alabama.

Your Options To Get Out of Debt in Alabama

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 in Alabama
Alabama residents who choose this program connect with a certified credit counselor to discuss their credit history and take financial education courses on topics like budgeting and factors that influence your credit score.
Pros
Credit counseling is a low-cost solution to help you determine the best pathway for your monetary goals based on your current financial situation.
Cons
Some financial education courses require a significant time commitment, and credit counseling doesn’t actually involve paying off your debts.
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 a debt management plan (DMP).

How It Works in Alabama
Alabamians can set up a DMP through a credit counseling agency or private debt management organization, creating a monthly payment schedule for unsecured debts.
Pros
Credit counselors can negotiate lower interest rates or ask creditors to waive late fees and other account charges on your behalf.
Cons
Setting up a DMP often requires you to close out most, if not all, of your current credit accounts to avoid adding to your balances while you’re working to pay them down.
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 from TurboDebt’s resource library.

Debt Consolidation

Some Yellowhammer State residents with multiple debts consolidate those balances into a single monthly payment.

How It Works in Alabama
Alabamians can take out a fixed-rate, low-interest consolidation loan at a bank or credit union to reduce their interest rates and restructure debt payments.
Another option includes opening a zero-interest balance transfer credit card and moving your outstanding credit card balance to the new card during the initial promotional period after the card is opened.
Pros
-Consolidation loans can significantly reduce the amount of interest you pay if you’re able to secure a loan at a good rate. To do this, you’ll need a pretty strong credit score.
-Zero-interest balance transfer cards give you time to pay down debt interest-free. These cards typically offer an introductory rate lasting from 12-18 months.
Cons
-If your average credit score with the three major credit reporting firms (Experian, TransUnion, and Equifax) is only fair (typically between 580 and 660), you may not qualify for the lower interest rates that make a consolidation loan worth it.
-Zero-percent interest credit cards might prove ineffective if you don’t pay most or all of your balance during the introductory period. You could be stuck paying more in interest, with APRs as high as 29.99%, on any portion of your transferred balance that carries over to the next billing period after your introductory promotion expires.
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, 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 debt consolidation 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 in Alabama
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
Debt settlement can save you up to 50% of your total debt when the organization negotiates with creditors to accept a portion of your current debt in a lump sum payment in return for forgiving (or waiving the collection of) your remaining balance.
After this, your account will be marked as “settled in full,” and you’ll start over again, free of that debt entirely.
Cons
While you put money into your savings account and stop making payments to your creditors, your credit score typically drops significantly.
This will make it much harder to qualify for new loans and lines of credit for several months or even years afterward while you work to rebuild your credit.
Cost
Debt settlement doesn’t cost anything upfront. However, once the debt settlement company negotiates an acceptable agreement with your creditor(s), 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, but TurboDebt clients in the Dixie State enrolled an average of nearly $10,000 in total debt in 2024.
Resources
Learn more about the debt settlement process and how it helps 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 in Alabama
Alabama residents file with their regional bankruptcy court. It’s a good idea to consult with a bankruptcy attorney before you begin the process.
Pros
You may have some debts forgiven once you’ve sold off assets to pay creditors (if filing Chapter 7 bankruptcy) or if you’ve stuck to a court-approved repayment plan, typically for a predetermined period of 3 to 5 years (when filing Chapter 13 bankruptcy).
Cons
Bankruptcy negatively impacts your credit history for up to 10 years after your bankruptcy case is discharged.
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
19,124 Alabama residents filed for bankruptcy in 2024.
Resources
Most consumers file either Chapter 7 or Chapter 13 bankruptcy. Find out which one works best for your financial circumstances.

What You Need To Know About Debt in the State of 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 Contracts6 years
Promissory Notes6 years
Open-Ended Agreements3 years
Oral Agreements6 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 health care 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 hard to get out without help. TurboDebt’s mission is to give consumers options to break the debt cycle, providing support and offering solutions through customized debt relief plans.

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

“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. Therefore, it’s best to reach out for a complimentary consultation with a certified credit counselor or other experienced and knowledgeable debt expert to get advice and guidance on the best course of action for your situation,” Reichert advises.

TurboDebt provides expert guidance to help you determine the best course for debt relief. It only takes a few minutes to get the help you need to overcome debt and start living in financial freedom.

How TurboDebt Helped Alabama Residents Get Relief Last Year

We’ve already helped thousands of Alabamians save an average of 56% of their total debt balances. Contact us today to find out if you qualify for debt relief through TurboDebt.