The Alabama Homestead Exemption

If you're considering filing for bankruptcy in Alabama, the Alabama homestead exemption will help you protect the equity in your home. This article explains the amount of Alabama's homestead exemption and how to apply it in bankruptcy when you want to keep your house.

How Much Is the Homestead Exemption in an Alabama Bankruptcy?

In Alabama, you'll use Alabama's state exemptions because the federal bankruptcy exemptions aren't available (some states allow residents to choose between the two sets). You'll find Alabama's homestead exemption amount listed below.

What Property Can You Protect With the Alabama Homestead Exemption?

In Alabama, the homestead exemption applies to up to 160 acres of real property on which your home, condominium, or mobile home is located. To claim the homestead exemption, you must occupy the property as your principal residence.

Other Requirements for Keeping a Home in Bankruptcy

If you can't protect all of your home equity, you might not be able to keep your home. Typically, the Chapter 7 trustee appointed to your case would sell the house, return the exemption amount to you, pay off the mortgage, and pay creditors with the amount remaining after deducting the trustee's fee.

In Chapter 13, the trustee doesn't sell property, so you could keep it. However, that doesn't mean Chapter 13 filers get a break regarding how much equity they can retain. Instead, you'd need to pay creditors the value of the nonexempt equity through the Chapter 13 plan.

But that isn't all. Keeping your home requires being current on the mortgage when filing for Chapter 7. Otherwise, you could lose it to the lender through foreclosure, possibly even during the Chapter 7 case. If you're behind on payments when filing for Chapter 13, you have an option not available in Chapter 7. You can catch up on the payments over time through the plan.

Learn about other requirements you must meet in Your Home in Chapter 7 and Your Home in Chapter 13. Also, find out why filing for Chapter 13 is better than Chapter 7 when you're behind on payments and don't want to lose your house.

Claiming the Homestead Exemption

When completing your bankruptcy forms, you'll do the following:

• disclose your home on Schedule A/B: Property
• list your home and the homestead exemption law on Schedule C: The Property You Claim as Exempt, and
• if filing for Chapter 7, explain whether you plan to keep or surrender the home on Statement of Intention for Individuals Filing Under Chapter 7.

Because your home is likely your most valuable asset, consider consulting with a bankruptcy lawyer to ensure you can protect it in bankruptcy.

Filing a Homestead Declaration

In Alabama, you must file a homestead declaration before you file for bankruptcy to claim the homestead exemption. A homestead declaration is a form filed with the county recorder's office or office of the probate judge in your county to put your right to a homestead exemption on record.

Where to Find the Homestead Exemption Statute

You'll find Alabama's homestead exemption on the Alabama Legislature website in Alabama Code §§ 6-10-2, 3, 4, 12, but check the Alabama State Treasurer's website for amount changes. The amount changes on April 1 every three years and is posted on July 1, the year before it goes into effect (the listed amount is effective as of April 1, 2024). The best way to protect your assets is by consulting a local bankruptcy lawyer.

When You Can Use Bankruptcy Exemptions

You can file for bankruptcy in Alabama after living there for over 180 days. However, you must live in Alabama for at least 730 days before filing to use the current state's exemptions. Otherwise, you'd use the previous state's exemptions.

If you lived in multiple states during the two years before filing for bankruptcy, you'd use the exemptions of the state you lived in for the majority of the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)

Learn more about filing for bankruptcy after moving to a new state, the current amount of the federal cap, and other essential exceptions to homestead exemptions. Also, spouses can double some exemption amounts if both parties own the property, but not all of them. Learn about other filing considerations for spouses.

Need More Bankruptcy Help?

Did you know Nolo has made the law accessible for over fifty years? It's true, and we wholeheartedly encourage research and learning. You can find many more helpful bankruptcy articles on Nolo's bankruptcy homepage. Information needed to complete the official downloadable bankruptcy forms is on the Department of Justice U.S. Trustee Program website.

However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.