Bankruptcy Information

The State of Alabama does not have federal bankruptcy exemptions like some states. It does, however, allow for certain possessions to be exempt or protected from creditors when filing for bankruptcy in Alabama.

There are some limits on the amount of equity that you may have in a home or vehicle that is exempted in the bankruptcy. Equity is defined as the difference in the value of an item and the amount of debt owed on a lien against the item. If the item, such as home or vehicle, is secured by a loan and payments are made on time, the equity is protected by your exemptions.  If you choose to keep the property, continual timely payments ensure that the property is protected through the bankruptcy.

For couples filing for bankruptcy protection, each person can claim a full set of exemptions unless otherwise noted.

Here is a list of assets protected by the Alabama Bankruptcy Exemptions:

1. Homestead – Real property (a building on actual land) or mobile home to $5,000. The land cannot exceed 160 acres for each person filing. All homestead declarations are required recorded before owner attempts to sell home.
2. Insurance – Mutual aid association benefits. $250 per month in annuity proceeds or avails. An average of $250 per month for disability proceeds or avails. Fraternal benefit society benefits. Wife of insured allowed life insurance proceeds or avails if she is the beneficiary. If a child listed as beneficiary of the insured, they are allowed life insurance proceeds or avails.
3. Pensions – Pensions are exempt for all teachers, state employees, law enforcement officers and judges (only payments being received). Traditional and Roth IRAs up to $1,000,000 per person. All tax-exempt retirement accounts such as 401(k)s, 403(b)s, profit sharing and money purchase plans, SIMPLE IRAs and SEP and defined-benefit plans.Personal property – This includes books, burial plots, church pews, any clothing needed and all family portraits and/or pictures.
4. Public benefits – Crime victim’s compensation, coal miner’s pneumoconiosis benefits, Southeast Asian War POW’s benefits and aid to blind, aged, disabled or AFDC. Also included are unemployment compensation and worker’s compensation.
5. Tools of Trade – Equipment that state military personnel are required to keep, such as arms and uniforms.
6. Wages – Approximately 75% of earned but unpaid wages. The bankruptcy judge may authorize more for low-income debtors.
7. Wild Card – Up to $3,000 of any personal property, except life insurance and wages

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Tags: Alabama, Bankruptcy Exemptions