Bankruptcy

Bankruptcy exemptions in Alabama allow individuals filing for bankruptcy to protect certain assets from creditors, ensuring they do not lose everything in the process. When filing for bankruptcy, individuals can choose between Chapter 7, which involves liquidating assets to pay off debts, or Chapter 13, which sets up a repayment plan over time. Exemptions exist to prevent people from being left with nothing, allowing them to keep essential property like their home, some personal belongings, and a portion of their income. The Alabama Homestead Exemption protects up to $15,000 of real estate equity for individuals and $30,000 for married couples. Personal property exemptions include essential household items, certain work tools, and a wildcard exemption of up to $7,750 per person for additional assets. Some wages, pensions, and public benefits are also safeguarded under Alabama law.

Unlike some states, Alabama does not allow the use of federal bankruptcy exemptions; individuals must rely solely on state-specific protections. To qualify for these exemptions, a person must have been a permanent Alabama resident for at least two years before filing. The state periodically adjusts exemption amounts for inflation, and in some cases, judges have discretion to modify exemptions based on individual circumstances. Businesses filing for Chapter 7 bankruptcy, however, cannot claim exemptions, as all assets are either sold or returned to creditors. Understanding these laws and consulting with a bankruptcy attorney is crucial to navigating the process effectively and making informed financial decisions.