If you file a Chapter 7 bankruptcy in Alabama, Alabama’s bankruptcy exemptions can help you protect all or part of your property. Alabama’s bankruptcy exemptions also play a role in Chapter 13 bankruptcy. Keep reading to learn about the property that can be protected by Alabama’s bankruptcy exemptions.
The Bankruptcy Exemptions in Alabama
Exemptions are laws that allow you to protect specific property from your creditors, such as your car or home. If you file a Chapter 7 bankruptcy, you can keep the items that are protected by Alabama’s bankruptcy exemptions. If you file for Chapter 13 bankruptcy, Alabama’s bankruptcy exemptions play a role in how much you repay your creditors through your Chapter 13 plan.
To learn more about bankruptcy exemptions, including how they work, which state exemption system you should use, and special rules for the homestead exemption, see Nolo’s Bankruptcy Exemptions topic page.
Federal Exemptions Not Available in Alabama
Alabama has its own exemptions that you can use when you file a bankruptcy. There is also a set of bankruptcy exemptions established by federal law (called the federal bankruptcy exemptions). Alabama has opted out of the federal bankruptcy exemptions, meaning you must use Alabama’s exemptions if you file for bankruptcy in Alabama.
Although you can’t use the federal exemptions in Alabama, you may use any of the applicable federal non-bankruptcy exemptions. The federal non-bankruptcy exemptions protect property such as federal retirement accounts and veterans’ benefits.
Married Couples May Double Alabama Exemptions
Married couples filing a joint bankruptcy in Alabama may “double” the exemption amounts, meaning they may each claim the full exemption amount for any property belonging to them. Bear in mind that you may only claim an exemption and protect property that belongs to you.
Commonly Used Alabama Bankruptcy Exemptions
Below is a list of commonly used Alabama bankruptcy exemptions. Unless otherwise indicated, all references are to the Code of Alabama.
Up to $15,000 in value and up to 160 acres of real estate and the residence upon it, including a house, mobile home, or similar dwelling place. Ala. Code 6-10-2
To learn more, see The Alabama Homestead Exemption.
Example. You and your spouse own a home worth $90,000 and owe $60,000 on the mortgage. Thus, you have $30,000 of equity in your home. If you and your spouse file a joint bankruptcy, you may each claim the homestead exemption, to protect a total of $30,000 of equity in your home. The Alabama homestead exemption will protect the full amount of equity in your home.
Burial plot or church pew for use by you or your family. Ala. Code 6-10-5
Clothing, family portraits, pictures, and books for use by you or your family. Ala. Code 6-10-6
Life insurance proceeds. Ala. Code 6-10-8
Retirement accounts and benefits
IRAs, Roth IRAs, and retirement accounts qualified under the Internal Revenue Code. Ala. Code 19-3B-508
State Employees’ Retirement Systems accounts and benefits. Ala. Code 36-27-28
Teachers’ Retirement System accounts and benefits. Ala. Code 16-25-23
Earned income tax credit. Ala. Code 38-4-8; 38-5-5; In re James 406 F.3d 1340 (11th Cir. 2005)
Wages and Income
75% of wages or 30 times the federal minimum wage. Ala. Code 6-10-7, 5-9-15
(You can learn more about wage exemptions in Nolo's article Alabama's Wage Garnishment Laws.)
Tools of the Trade
Uniforms and arms of military personnel. Ala. Code 31-2-78
Up to $7,500 of any personal property, except for wages. Ala. Code 6-10-6; 6-10-126 (Learn more in The Alabama Wildcard Exemption in Bankruptcy.)
Confirming the Alabama Bankruptcy Exemptions
This list includes some of the more commonly used Alabama bankruptcy exemptions, but there are numerous other exemptions available to protect specific property. Alabama updates its exemptions periodically. You can verify the current exemption values by clicking on the link for the Code of Alabama on the website of the Alabama Legislature. (You can learn more about this at Nolo’s Legal Research Center).