Alabama does not have an exemption that specifically protects your motor vehicle, but it does have a "wild card" exemption that you can use to help protect your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy.
Read on to learn how you can use Alabama's wildcard exemption to protect your car.
(For more information about exemptions, including how wildcard exemptions work, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Bankruptcy area.)
Alabama’s wild card exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors. If the equity in your car is less than Alabama’s wild card exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
In Alabama, you can exempt up to $7,500 in equity in your car or other vehicle, using the wild card exemption.
Example. Roger owns a 2012 Toyota Tundra worth $22,000. He owes the dealership $16,000 on the truck, so there is $6,000 worth of equity. Roger can use the wild card exemption to fully protect the equity in his truck if he files a Chapter 7 bankruptcy in Alabama.
Some states allow bankruptcy filers to use the Federal Bankruptcy Exemptions instead of state exemptions, but Alabama is not one of these states.
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. Alabama permits married couples filing bankruptcy together to double the wildcard exemption and protect up to $15,000 of equity in any property, including their vehicles.
(To learn about the advantages and disadvantages of joint bankruptcy filings, see Nolo's section on Bankruptcy Options for Married Couples).
In Alabama, you can use the wildcard exemption to protect any personal property that you own, which can be more than one vehicle, as long as the total equity is not more than $7.500.
You can find Alabama’s wild card exemption at Ala. Code 6-10-6.
You can find the Alabama statutes on the website of the Alabama Legislative Information System Online (ALISON) at www.alisondb.legislature.state.al.us. To learn how to find state statutes, see Nolo’s Laws and Legal Research area.