Alabama Bankruptcy Exemptions

December 11, 2018

Like all states, Alabama has its own set of exemptions that you can use when filing for Chapter 7 or Chapter 13 bankruptcy. Exemptions determine what property you can protect, such as a home, car, instrument, or retirement account. What will happen to your nonexempt property will depend on the chapter type.

  • In Chapter 7, the bankruptcy trustee will sell any nonexempt property (things you can’t protect with an exemption).
  • In Chapter 13, you’ll pay your creditors the value of your nonexempt property or your disposable income, whichever is greater.

How Bankruptcy Exemptions Work

Some states allow debtors to choose between the state exemption system and a set of federal bankruptcy exemptions – but Alabama isn’t one of them. In Alabama, you must use the state exemptions below. You can also use any applicable amounts in the federal nonbankruptcy exemptions.

Unless noted otherwise, a married couple who files jointly (together) in Alabama can each claim the full amount of each exemption in property in which they both have an ownership interest, essentially doubling the protected amount.

You can learn more about bankruptcy exemptions work, which state exemption system you should use, and special rules for the homestead exemption in Bankruptcy Exemptions – What Can I Keep When I File for Bankruptcy?

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. Check with an attorney about the need to record a homestead declaration.

Personal Property

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

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

Wages

6-10-7 - 75% of income or 30 times the federal minimum hourly wage or 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); 19-3B-508 - IRAS and Roth IRAs to $1,283,025 and other retirement accounts.

12-18-10 – Retirement and disability benefits for judges.

16-25-23 – Retirement, pension, annuity benefits for teachers.

19-3B-508 – Qualified (spendthrift) trusts.

36-21-77 – Retirement and disability benefits for law enforcement officers.

36-27-28 – Retirement benefits and annuities for state employees.

Public Benefits

15-23-15(e) - Crime victims' compensation.

25-4-140 – 100% of unemployment compensation.

25-5-86 – 100% of workers' compensation.

31-7-1, 2 – 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.

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 – 100% of life insurance proceeds.

27-14-31 – Disability proceeds up to $250 per month.

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

27-30-25 – Mutual aid association benefits.

27-34-27 – Fraternal benefit society benefits.

Wildcard

6-10-6; 6-10-12 – $7,750 any personal property (except compensation such as wages and salary).

Other

Add any applicable Federal Nonbankruptcy Exemptions.

Confirming Exemptions

This list includes the majority of bankruptcy exemptions available in Alabama. However, it doesn’t include all exemptions. The State Treasurer will adjust the Alabama exemption amounts for inflation each July 1. Consider verifying exemption amounts in your state’s code or by meeting with a local bankruptcy attorney.

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