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Alabama Debt Relief Guide

Alabama, colloquially known as the “Cotton State”, has seen a resurgence since the onset of the COVID-19 pandemic in early 2020. Unemployment rates are close to their record lows, and the average credit card debt sits just around $5,000. Boasting some of the most affordable places to live in the country, new homeowners have still found it tough to find a new home, much like the rest of the country. 

“Even though Alabamans have fared better than residents in other states in the wake of the pandemic, they’re not immune to the challenges we’re all facing with rising prices and interest rates,” says Gary Herman, President of Consolidated Credit. “As budgets get squeezed, it’s important to keep credit card balances low to stay on budget. That’s particularly important for people who are looking to buy a home to pay off debt so they can be successful in such a highly competitive housing market.

Consolidated Credit Helps Alabama Residents Reduce Their Credit Card Payments by Up to 50%

Consumer Debt in Alabama

This chart shows a breakdown of average consumer debt in Alabama, based on the latest report of Household Debt report from the Federal Reserve.

In 2020, 18,127 Alabamians filed for bankruptcy compared to the previous year’s filing total of 26,809.

Income and employment in Alabama

Alabama has a per capita, or average per-person income, of $46,908, which happens to fall just short of the nationwide average of $59,729. The median household income is $50,536. And their minimum wage is on par with the federal minimum wage of $7.25 per hour.

With Alabama being a right-to-work state, it is “the public policy of Alabama that the right of persons to work shall not be denied or abridged on account of membership or non-membership in any labor union or labor organization.” Alabama has had this statute in its state code since 1953.

During the spring of 2020, Alabama had an unemployment rate of 13%. As of March 2022, the unemployment rate sits at 3.1%, nearing the pre-pandemic record low of 2.6%. Three major corporate growth projects have picked up steam since August 2020, creating job opportunities and giving hope to more economic activity on the way.

Though the percentage of persons in poverty is slightly below average, the lower cost of living helps in this regard. Senator Gerald Allen believes that strengthening the workforce long-term starts with investing in students, with only 25.5% of the population holding a bachelor’s degree or higher.

Apply for unemployment benefits in Alabama »

Unemployment Benefits: 

  • Minimum per Week: $45
  • Maximum per Week: $275
  • Maximum availability of benefits: 26 weeks

General Information about the Unemployment Insurance Program:

Alabama Department of Labor

To file a UI claim online:

Alabama Department of Labor Initial Claim for Unemployment Compensation

To file a claim by telephone number:

Alabama Department of Labor Telephone Numbers

Coronavirus update: Alabama is providing updates on Unemployment Insurance changes related to COVID-19 here:

Alabama Department of Labor Unemployed COVID-19 Resources

Job Centers:

CareeerOneStop.org

Banking and taxes in Alabama

Alabama has an income tax range of 2% to 5% and a state sales tax of 4%. However, that sales tax rate can jump up to 7.5% if you are in the Banks zip code (36005).  An alternative sales tax rate of 9% applies in the tax region Pike, which belongs to the 36005-zip code as well. 

Banking is also fairly uncommon compared to most states. Residents without a checking or savings account represent 7.6% of the population. 

Alabama housing market

Alabama possesses one of the most affordable large metro cities in the U.S. currently, Birmingham-Hoover, as well as 4 out of 15 in small metro cities:

  1. Florence-Muscle Shoals
  2. Gadsden
  3. Decatur
  4. Dothan

While the median home price in Alabama sits around $265,200, the number of homes sold fell 2.7% and the number of homes for sale fell 39.5%. So, while affordable living is readily available, people have found the market tough, much like most of the country during and post-pandemic.

Alabama offers a homestead exemption of $15,000, though that is doubled for married couples, joint owners, or joint filing spouses.

  • 68.8% of Alabamians are homeowners
  • Median mortgage payment: $1,147
  • Median rent payment: $792
  • Average mortgage debt: $23,060

If you are finding it challenging to make rental payments, you can seek assistance through Alabama’s rental programs.

For those seeking mortgage relief, Alabama offers a lending hand through Mortgage Assistance Alabama.

Talk to a HUD-certified housing counselor to get help with the housing challenges you’re facing.

Retirement in Alabama

With a cost of living 13% below the national average, and the second-lowest property taxes in the U.S., Alabama is considered the sixth-best state for retirement. Financially, $713,000 is needed to retire comfortably, $334,052 more than the average Alabamian’s retirement account ($378,948 on average).

Alabama’s highest state income tax rate is only 5%, and Social Security income from traditional pension plans is exempt from income tax. This is a plus, considering 30% of elderly households rely on Social Security for at least 90% of their income. All homeowners 65 or older are exempt from state property taxes, which means the average retiree (62 years of age) just needs to wait 3 years to become eligible.

Average Alabama insurance premiums

There are over four million licensed drivers in Alabama, yet 19% of residents are driving uninsured. Ranking Alabama 7th in the nation for the highest number of uninsured drivers. The average yearly cost for auto insurance premiums in Alabama is $1,358, slightly lower than the national average of $1,674 respectively. Having insurance in Alabama is crucial as it is an “at-fault” state, meaning the insurance company of the person found at fault for the accident must pay for property damages, medical bills, etc.  

The cost of insuring a home has continued to rise steadily over the last 12 years, more than 40% since 2010. Average Homeowner insurance premiums in Alabama are higher, $2,328 per year, than those nationwide, around $1,680.

Approximately 573,672 Alabamians are without healthcare. This can be attributed to the average monthly premium of $513 a month ($6,163 per year), which ranks unfavorably in terms of premium coverage in the country.

Helpful resources for Alabamians facing hardship

Food Insecurity

City/RegionFood BankPhone NumberAddress
AuburnHome – Food Bank of East Alabama334-821-9006355 Industry Drive Auburn, AL 36832
BirminghamCommunity Food Bank of Central Alabama205-942-8911107 Walter Davis Drive, Birmingham, AL 35209
HuntsvilleFood Bank of North Alabama256-539-22562000 B. Vernon Ave., Huntsville, AL 35805 [P.O. Box 18607]
MontgomeryMontgomery Area Food Bank, Inc.334-263-3784521 Trade Center Street, Montgomery, AL 36108
TheodoreFeeding the Gulf Coast251-653-16175248 Mobile South Street, Theodore, AL 36582

Veterans

As of 2019, Alabama was home to 330,207 Veterans. These resources are available to help Veterans that are facing unemployment, homelessness, and other hardships.

Alabama Department of Veterans Affairs
Telephone: 334-242-5077

Find Veterans’ services in your area >>

Helpful employment resources for Veterans:

How Consolidated Credit helps Alabamians find debt relief

In 2021, Consolidated Credit provided free credit counseling to 2,897 Alabama residents. Of those, 83 went on to consolidate their debt with our help through a debt management program (the average amount of debt enrolled was $9,085). The others received a free debt analysis and complementary budget evaluation, and they were directed to the right solution for their situation to get out of debt as quickly as possible.

We’d also like to congratulate the 69 Alabama residents that got debt-free last year with the help of Consolidated Credit!

Relief options to consider if you’re in debt in Alabama

If you have good credit and need to pay off credit card debt and other non-secured debts, a debt consolidation loan is an excellent option for you. By having good credit, you can refinance your debt at a low-interest rate and enjoy one monthly payment. This will help you get out of debt faster, and you may wind up paying less each month. This is an excellent solution for Alabama residents with high debt and a good credit score.

Alabama homeowners may qualify for a home equity loan or a home equity loan of credit, sometimes called a (HELOC). These types of loans use the equity in your home. Due to rapid home value increases, many residents have equity in their homes. The loan allows you to borrow against the equity in your home and pay off credit cards and other debt. This is not a step to take lightly because you could lose your home in foreclosure if you can’t make the payments. If you are considering borrowing against your home, call 1-800-435-2261 to speak with a HUD-certified housing counselor to make sure this is a safe option for you.

Consolidated Credit helps Alabama residents with counseling programs that identify the best way to get out of debt after considering their situations. Alabama residents can get a confidential debt and budget evaluation from a certified credit counselor. Afterward, the counselor will go over the available options and which course of action best meets a person’s needs and goals.

In Alabama, as in other states, it’s best to avoid bankruptcy. If you can afford to repay all that you owe to avoid credit damage but can’t do it on your own, a debt management program can help. You enroll through a credit counseling agency. The agency will work with your creditors to reduce or eliminate interest and work out a payment schedule. Qualifying Alabamians can get out of debt in 36-60 payments, on average.

Another option for Alabama residents is debt settlement. With debt settlement, you settle your debt independently or with the help of a debt settlement company. In this program, you agree to pay your creditors a portion of what is owed. This will damage your credit rating because you are not paying on the terms you first agreed to. Late payments, which are often part of this program, will hurt your credit rating for seven years. Even with those negatives, this can be an excellent program for Alabama residents with overwhelming debt. It can help you avoid bankruptcy.

If you’re curious how we can help you, below, you will find a few case studies from clients that we’ve helped in Alabama. If you’re facing challenges with debt, call us at (844) 276-1544 to receive a free debt and budget evaluation from a certified credit counselor.

If you’re tired of making payments and getting nowhere, talk to a certified credit counselor to review your options for debt relief.

Case Study

Suzanne from Sylacauga, AL

“I wish that I’d gone with this program sooner! If I had my debt would be gone already. I’d recommend this program to anyone looking for lower interest rates and a way to actually get your credit cards paid off. ”

Where she started:
  • Total unsecured debt: $16,049.00
  • Estimated interest charges: $8,870.56
  • Time to payoff: 11 years, 6 months
  • Total monthly payments: $641.96
After DMP enrollment:
  • Average negotiated interest rate: 8.30%
  • Total interest charges: $6,876.47
  • Time to payoff: 5 years, 1 months
  • Total monthly payment: $320.00
Time Saved

6 years, 5 months

Monthly Savings

$321.96

Interest Saved

$1,994.09

Case Study

Ryan from Pinson, AL

“This service has been a lifesaver! I highly recommend Consolidated Credit. They enabled me to fix my finance problems. ”

Where he started:
  • Total unsecured debt: $23,013.00
  • Estimated interest charges: $12,922.00
  • Time to payoff: 12 years, 4 months
  • Total monthly payments: $920.52
After DMP enrollment:
  • Average negotiated interest rate: 10.61%
  • Total interest charges: $8,175.00
  • Time to payoff: 4 years, 6 months
  • Total monthly payment: $560.00
Time Saved

7 years, 10 months

Monthly Savings

$360.52

Interest Saved

$4,747.00

Case Study

David from Montgomery, AL

“I am very pleased with the service that Consolidated Credit has provided. Now I’m finally in my home stretch to be debt free. ”

Where he started:
  • Total unsecured debt: $26,453.00
  • Estimated interest charges: $15,239.00
  • Time to payoff: 13 years, 6 months
  • Total monthly payments: $1,058.12
After DMP enrollment:
  • Average negotiated interest rate: 2.60%
  • Total interest charges: $460.27
  • Time to payoff: 3 years, 10 months
  • Total monthly payment: $585.00
Time Saved

9 years, 8 months

Monthly Savings

$473.12

Interest Saved

$14,778.73

Get the debt relief you need! Talk with one of our certified credit counselors today to get a free debt and budget evaluation and find out if you qualify for a debt relief program.