Alabama Bankruptcy Exemptions: Protect Your Property in Chapter 7
Alabama bankruptcy exemptions protect $18,800 in home equity and offer a $9,400 wildcard exemption for personal property. You must live in Alabama for two years before filing to use state exemptions. Most people keep their home, car, retirement accounts, and essential belongings through Chapter 7 bankruptcy.
Get Free ConsultationAlabama residents filing Chapter 7 bankruptcy can protect essential property through state exemptions. You must live in Alabama for at least two years before filing to use these protections.
Understanding exemptions helps you keep what you need while getting debt relief. Most people keep their home, car, and personal belongings through Chapter 7.
Maximize Your Alabama Bankruptcy Exemptions
Protect your home, car, and personal property with expert guidance. Connect with a bankruptcy attorney who knows Alabama exemption laws and can help you keep what matters most.
Speak With Attorney NowWhy Alabama Bankruptcy Exemptions Matter
Bankruptcy exemptions protect your property up to specific dollar amounts. You keep items necessary for maintaining a basic standard of living.
Alabama exemptions cover clothing, personal property like vehicles, and real property like your primary residence. Without exemptions, the bankruptcy trustee could sell your assets to pay creditors.
The exemptions shield your fresh start from becoming a financial catastrophe.
Who Qualifies for Alabama Bankruptcy Exemptions
You must be an Alabama resident for at least two years before filing. Congress created this rule to prevent exemption shopping across state lines.
Married couples filing jointly can double exemptions if both own the property. Single and married filers also access federal non-bankruptcy exemptions for retirement accounts and certain benefits.
Can You Use Federal Bankruptcy Exemptions in Alabama?
No, Alabama doesn’t allow federal bankruptcy exemptions.
You must use state exemptions found in the Alabama Code. Exemption amounts adjust for inflation every three years. The most recent update took effect July 1, 2023.
You can still use federal non-bankruptcy exemptions for retirement accounts and disability benefits.
Alabama Real Property Exemption
Alabama’s homestead exemption protects $18,800 in home equity. Equity equals your home’s current value minus what you owe.
For example, if your home is worth $225,000 and you owe $207,000, you have $18,000 in equity. The homestead exemption fully protects your home.
If you have more equity than the exemption covers, the trustee can sell your home. They pay you the exemption amount and use remaining funds for creditors.
You might consider Chapter 13 bankruptcy instead if you have significant home equity.
Alabama Personal Property Exemptions
Personal property includes anything moveable that you own. Real property refers to land and buildings.
Fully Protected Property
Alabama fully exempts these items:
- Burial place and church pew
- Clothing, books, family portraits and pictures
- Tools of the trade
- Military arms, uniforms, and required equipment
Alabama Wildcard Exemption
Alabama offers a generous $9,400 wildcard exemption. You can apply it to any property except real estate, wages, or salary.
Alabama doesn’t provide specific exemptions for common items like vehicles or household goods. You must use the wildcard exemption strategically to protect important personal property.
Use the wildcard to protect unexempt property or add it to existing exemptions. Many people use it to protect their car or increase their home equity protection.
Income and Benefits Exemptions
Wages and Earnings
You can keep 75% of unpaid weekly net income. Alternatively, you keep 30 times the federal minimum wage, whichever is greater.
Net income is your take-home pay after deductions.
Retirement Accounts
Federal non-bankruptcy exemptions protect retirement accounts up to their full value:
- Tax-exempt retirement accounts
- 401(k)s, 403(b)s, profit-sharing and money purchase plans
- SEP and SIMPLE IRAs
- Traditional and Roth IRAs
- ERISA-qualified plans
- Public employee pensions
- Teacher retirement and annuity benefits
- Law enforcement retirement and disability benefits
- State employee retirement benefits
- Judge retirement and disability benefits
- Qualified spendthrift trusts
Public Benefits
Alabama fully exempts these public assistance benefits:
- Crime victims’ compensation
- Unemployment compensation
- Workers’ compensation
- Southeast Asian War POW benefits
- Aid to blind, aged, and disabled individuals
- Earned income tax credit
- Other public assistance
Insurance Benefits
Alabama exempts various insurance proceeds:
- Life insurance proceeds (fully exempt)
- Disability proceeds up to $250 monthly
- Annuity proceeds up to $250 monthly
- Mutual aid association benefits (fully exempt)
- Fraternal benefit society benefits (fully exempt)
Getting Help With Alabama Chapter 7 Bankruptcy
Understanding exemptions ensures you keep essential property during bankruptcy. You don’t lose everything when you file for debt relief.
A bankruptcy attorney can help you maximize exemptions and protect your assets. Complex cases with significant assets benefit from professional guidance.
If you need help determining whether Chapter 7 is right for you, speak with a bankruptcy attorney for free. They can review your situation and explain your options.