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GADSDEN BANKRUPTCY LAWYER

What are the bankruptcy exemptions in Alabama?

Like all states, Alabama has its own set of exemptions that you may use when filing for Chapter 7 or Chapter 13 bankruptcy. Exemptions determine what property (such as a home, car, instrument, retirement account, etc.) you may keep in a Chapter 7 bankruptcy, and how much you must pay to certain creditors in Chapter 13 bankruptcy. Some states allow debtors to choose between the state exemption system and a set of federal bankruptcy exemptions – but Alabama is not one of them. In Alabama, you must use the state exemptions below. In addition to this list, you may also use any applicable amounts in the federal nonbankruptcy exemptions.

Unless noted otherwise, if a couple is married and filing jointly in Alabama, each spouse may claim the full amount of each exemption. This is informally called “doubling.”

A bankruptcy exemption is simply the value of certain property that state or federal law says, a creditor can NOT touch, no matter what.  The two (2) types of Bankruptcy Exemptions are Real Property and Personal Property Exemptions.  Each state enacts its own exemption laws or a state can decide to have the federal exemption laws apply within its borders.  Regardless, every state provides protection for a certain amount of real or personal property owned by its citizens against the claims of creditors.

Real Property (Homestead) Exemption in Alabama

In Alabama, the Real Property exemption is also known as the Homestead exemption.  The homestead exemption protects a specified amount of the value of the personal residence owned by an individual.  Presently in Alabama, the homestead exemption is $15,000 for each individual who is an owner of the personal residence.  Therefore, married couples who are both on the deed can exempt up to $30,000.

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Personal Property Exemptions in Alabama

The other type of exemption is the Personal Property exemption.  Any property owned by a person that is not real estate constitutes personal property.  The personal property exemption will protect property as varied as household goods and furnishings, automobiles, computers, jewelry, lawn mowers and lawn tools, personal tools, bank accounts or proceeds from a lawsuit for personal injury.  Presently, the personal property exemption in Alabama is $7,500 per person.  Therefore, married couples can exempt up to $15,000.

There are some categories of both real and personal property that are entitled to complete protection no matter what the total value may be. Worker’s compensation benefits and social security benefits including both monthly benefits and any lump sum awards are both protected.  Likewise, IRS qualified retirement accounts, which includes 401Ks and IRAs from your employment are 100% exempt from your creditors.  Other lesser known, but equally untouchable are Burial plots, a church pew, books, pictures and portraits, wearing apparel and tools of trade (tools used specifically in your business).

The State of Alabama increased the limits of the exemptions listed above (Personal Property – $7,500/$15,000) and (Real Property – $15,000/$30,000) on June 11, 2015.  This was the first time they had been increased since 1982.  Fortunately, a part of that same bill signed into law on June 11, 2015, was that the exemptions would be automatically adjusted by the Alabama State Treasurer every 3 years beginning July 1, 2017. This adjustment would reflect cumulative changes in the consumer price index for the 3 year period ending on the December 31 preceding the adjustment date.  The new figures will go into effect the following April 1.  So beginning April 1, 2018, the new Personal Property Exemption will increase to $7,750/$15,500 and Homestead Exemption will increase to $15,500/$31,000.  These figures will then change again on April 1, 2021, April, 1, 2024, etc.

Alabama Bankruptcy Exemptions

Unless otherwise noted, all law references are to the Alabama Code.

Homestead

6-10-2 - Real property or mobile home, up to $15,500. Property can't exceed 160 acres.

6-10-20 - Before an attempt to sell the home, a homestead declaration must be recorded.

Personal Property

6-10-5 - A burial place and a church pew or seat.

6-10-6 - Clothing, books, family portraits and pictures.

Wages

5-19-15; 6-10-7 - For consumer loans, leases, and credit sales: 75% of weekly net income or 30 times the federal minimum hourly wage. For other cases: 75% of earned but unpaid wages. The judge may approve more for low-income debtors.

Pensions

11 U.S.C. § 522 - Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).

11 U.S.C. § 522(b)(3)(C)(n) - IRAS and Roth IRAs to $1,283,025.

19-3B-508 - IRAs, Roth IRAs and other retirement accounts.

12-18-10 - Judges (for payments being received only).

16-25-23 - Teachers.

19-3B-501 to 503 - With certain exceptions, spendthrift trusts.

36-21-77 - Law enforcement officers.

36-27-28 - State employees.

Public Benefits

15-23-15 - Crime victims' compensation.

25-4-140 - Unemployment compensation.

25-5-86 - Workers' compensation:

31-7-2; 31-7-1 - Southeast Asian War POW's benefits.

38-4-8; 38-5-5 - Aid to blind, aged, and disabled; other public assistance, including earned income tax credit (In re James, 406 F.3d 1340 (11th Cir. 2005)).

Tools of Trade

31-2-78 - Arms, uniforms, and equipment required to be kept by state military personnel.

Insurance

6-10-8 & 27-14-29 - Life insurance proceeds.

27-14-31 - Disability proceeds up to an average of $250 per month.

27-14-32 - Annuity proceeds up to $250 per month.

27-14-29; 6-10-8 - Life insurance. proceeds and 100% cash value.

27-15-26 - Life insurance, if policy prohibits use to pay creditors.

27-30-25 - Mutual aid association benefits.

27-34-27 - Fraternal benefit society benefits.

Wildcard

6-10-6; 6-10-126 - $7,750 any personalal property (except wages).

Other

Add any applicable Federal Nonbankruptcy Exemptions.

Confirming Exemptions

This list includes the majority of bankruptcy exemptions available in Alabama. However, it may not include all exemptions, and states often create exceptions to specific exemptions. In addition, the State Treasurer will adjust the Alabama exemption amounts for inflation periodically. Consider double-checking with your local bankruptcy court.

 

What are bankruptcy exemptions in alabama?

Unless otherwise noted, all law references are to the Alabama Code.

Homestead

6-10-2 - Real property or mobile home, up to $15,500. Property can't exceed 160 acres.

6-10-20 - Before an attempt to sell the home, a homestead declaration must be recorded.

Personal Property

6-10-5 - A burial place and a church pew or seat.

6-10-6 - Clothing, books, family portraits and pictures.

Wages

5-19-15; 6-10-7 - For consumer loans, leases, and credit sales: 75% of weekly net income or 30 times the federal minimum hourly wage. For other cases: 75% of earned but unpaid wages. The judge may approve more for low-income debtors.

Pensions

11 U.S.C. § 522 - Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).

11 U.S.C. § 522(b)(3)(C)(n) - IRAS and Roth IRAs to $1,283,025.

19-3B-508 - IRAs, Roth IRAs and other retirement accounts.

12-18-10 - Judges (for payments being received only).

16-25-23 - Teachers.

19-3B-501 to 503 - With certain exceptions, spendthrift trusts.

36-21-77 - Law enforcement officers.

36-27-28 - State employees.

Public Benefits

15-23-15 - Crime victims' compensation.

25-4-140 - Unemployment compensation.

25-5-86 - Workers' compensation:

31-7-2; 31-7-1 - Southeast Asian War POW's benefits.

38-4-8; 38-5-5 - Aid to blind, aged, and disabled; other public assistance, including earned income tax credit (In re James, 406 F.3d 1340 (11th Cir. 2005)).

Tools of Trade

31-2-78 - Arms, uniforms, and equipment required to be kept by state military personnel.

Insurance

6-10-8 & 27-14-29 - Life insurance proceeds.

27-14-31 - Disability proceeds up to an average of $250 per month.

27-14-32 - Annuity proceeds up to $250 per month.

27-14-29; 6-10-8 - Life insurance. proceeds and 100% cash value.

27-15-26 - Life insurance, if policy prohibits use to pay creditors.

27-30-25 - Mutual aid association benefits.

27-34-27 - Fraternal benefit society benefits.

Wildcard

6-10-6; 6-10-126 - $7,750 any personalal property (except wages).

Other

Add any applicable Federal Nonbankruptcy Exemptions.

 

Speak to an Experienced GADSDEN ALABAMA Bankruptcy Attorney Today

This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified bankruptcy lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact Dani Bone & Sam Bone to discuss your specific legal situation at 256-547-1005

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