Bankruptcy Exemptions in Alabama

While there are many consumers today struggling to keep up with their debts, there are solutions to help them preserve some of their property and get a fresh start. The simplest may be filing for chapter 7 bankruptcy. While there is the possibility that some property may need to be liquidated, this process may also allow some or all of their consumer debt to be erased, except for items such as tax debts, alimony, child support, and most student loans.

In addition, there are a number of exemptions that the consumer can claim to protect some or all of their property. There are both federal and state exemptions in much of the country, but in Alabama, residents are required to apply only state exemptions. However, when a husband and wife file jointly, many of those exemptions may be doubled.

How to Keep Your Car

State and federal exemptions differ in this area:

• Federal exemption – $3,225
• Alabama state exemption – no specific exemption

Alabama does allow a general exemption, which a resident can apply to their vehicle if they choose to do so. However, even if that vehicle is exempt from liquidation and the debt is erased through bankruptcy, the debtor must still keep up payments on any loans secured by it, otherwise the creditor could repossess the vehicle to recover their loan amount.

How to Keep Your Home

• Federal homestead exemption - $20,200
• Alabama state exemption – $5,000 of real property or a mobile home
  • Property is limited to 160 acres
  • Prior to any sale of exempt property, homeowner must file a homestead exemption

If there is a mortgage secured by that property, the homeowner must make regular payments or the lien holder may still be able to foreclose on the property to recoup their mortgage investment.

Alabama allows exemptions for other forms of personal property:

• A burial plot
• A church seat or pew
• Clothing, books, family portraits and pictures – all owned by that is the debtor and their family
• Tools of the trade
  • State military personnel – all necessary uniforms, arms, and equipment
• Any other personal property (except insurance and wages) – up to $3,000

Filing Schedule C of a Bankruptcy Petition

In order to claim the property exemptions provided by the state, the filer must complete Schedule C and include it with the bankruptcy petition. The form must contain the following detailed information:

• The property being claimed
• The Alabama state statutes substantiating those property claims
• The exemption value for each property claim
• Each property claim’s current assessed value (not the market value)

Getting Legal Help

Filing for bankruptcy can be a complex and emotional process. It can be difficult for the debtor to comprehend all the requirements and make the best decisions to provide for their financial future. A bankruptcy attorney can provide the help and guidance they need, taking an objective look at the circumstances and how to best relieve them for the future of the filer and their family.