Alabama Bankruptcy Exemptions: What You Get to Keep

If you file bankruptcy in Alabama, you cannot pick the federal bankruptcy exemption list. Alabama is an "opt-out" state under 11 U.S.C. § 522(b)(2), so debtors here must use Alabama's own exemptions (plus the separate federal nonbankruptcy exemptions, such as Social Security and veterans' benefits). The two figures that matter most are set by statute: a homestead exemption of $15,000 per filer under Ala. Code § 6-10-2, and a general personal-property exemption of $7,500 per filer under Ala. Code § 6-10-6. These base amounts are adjusted upward for inflation on a recurring schedule by the State Treasurer, so confirm the current dollar figures before you rely on them. Notably, Alabama has no separate motor-vehicle exemption—your car is protected only through that $7,500 personal-property pot.

Alabama makes you use the state exemptions

The federal Bankruptcy Code offers two paths in 11 U.S.C. § 522: a set of federal exemptions (subsection (d)) or your state's exemptions. But the Code lets each state "opt out" and force its residents onto the state list. Alabama has done exactly that. That means you cannot claim the federal homestead exemption—which is roughly $27,900 per filer for cases filed in the current federal adjustment cycle and is itself updated every three years—even though it is larger than Alabama's. You are limited to what the Alabama Code allows.

One important wrinkle: opting out only removes the federal subsection (d) list. You may still stack the federal nonbankruptcy exemptions on top of Alabama's, which protect things like Social Security benefits, most federal retirement and disability payments, and certain veterans' and railroad-worker benefits. Many filers overlook these, and they can shield assets that the state list does not.

The homestead exemption

Under Ala. Code § 6-10-2, the homestead exemption protects equity in your home (or mobile home) up to $15,000, limited to a lot or tract of no more than 160 acres. The protection covers the place where you actually live. Because Alabama exemptions are claimed per debtor, a married couple filing jointly who both have an ownership interest can generally each claim the homestead, effectively doubling the protected equity to roughly $30,000.

Two cautions. First, the statutory $15,000 is a base figure that Alabama law directs the State Treasurer to revisit and increase for inflation on a set cycle (see Ala. Code § 6-10-12), so the operative number in your case may be higher—always verify the current amount. Second, the homestead exemption protects equity, not the house itself. If your mortgage balance is close to your home's value, you may have little equity to exempt, but you also have little a trustee could reach by selling. Liens, mortgages, and properly recorded judgment liens are generally not erased by the exemption, though some judicial liens that impair the exemption can be avoided under 11 U.S.C. § 522(f).

Personal property, the "wildcard," and your car

Alabama's personal-property exemption (Ala. Code § 6-10-6) protects up to $7,500 in personal property of your choosing—again, per debtor, and subject to inflation adjustment. Because you can apply it to almost any personal property, it functions much like a wildcard exemption. There is no additional, separate "wildcard" line in Alabama law; this $7,500 is the flexible amount you have to spread across your belongings.

This is where Alabama's lack of a dedicated vehicle exemption becomes critical. Many states give you a specific car exemption on top of a wildcard. Alabama does not. To protect equity in a vehicle, you must carve it out of the same $7,500 you might otherwise use for furniture, electronics, tools, or cash in the bank. If you owe roughly what the car is worth, the loan eats your equity and little exemption is needed; if you own a paid-off car worth more than $7,500, the excess equity may be exposed unless it fits within your remaining personal-property allowance.

Beyond the $7,500, certain specific items are exempt regardless of value, including all necessary and proper wearing apparel for you and your family, family portraits and pictures, and all books used in the family. Burial places and church pews are also protected under Ala. Code § 6-10-5.

Wages and other protections

Alabama follows the federal wage-protection floor. The federal Consumer Credit Protection Act caps ordinary wage garnishment at the lesser of 25% of disposable earnings or the amount above 30 times the federal minimum wage. Alabama's own statute (Ala. Code § 6-10-7) likewise exempts 75% of wages from garnishment, so an Alabama judgment creditor generally cannot take more than 25%. Domestic support, taxes, and a few other special debts can exceed those limits.

Retirement accounts get strong protection too. Under federal bankruptcy law (11 U.S.C. § 522(b)(3)(C) and (n)), tax-qualified retirement plans such as 401(k)s and most IRAs are exempt, with a high inflation-adjusted cap on traditional and Roth IRAs. Alabama law also exempts various pension and insurance proceeds. These rules are technical, so list every retirement and benefit account on your schedules.

The residency trap: where your exemptions come from

Just because you file in Alabama does not automatically mean you use Alabama's exemptions. Under 11 U.S.C. § 522(b)(3), the exemption set is determined by where you were domiciled for the 730 days (about two years) before filing. If you moved to Alabama recently, you may be required to use a prior state's exemptions, or the federal set if that prior state would allow it. If you have lived in Alabama for more than two years, Alabama's exemptions apply. Recent movers should get advice before assuming the Alabama figures protect them.

Chapter 7 vs. Chapter 13

Exemptions matter in both chapters but in different ways. In a Chapter 7 liquidation, the trustee can sell non-exempt property to pay creditors, so exemptions determine what you keep outright. In a Chapter 13 repayment plan, you keep your property, but the value of your non-exempt assets sets a floor on how much unsecured creditors must receive over your three-to-five-year plan. Either way, the same Alabama dollar limits drive the math.

How to claim them and where to verify

Exemptions are claimed on Schedule C of your bankruptcy petition. You must list each asset, cite the Alabama statute, and state the claimed exempt value. Errors—wrong statute, overstated value, or omitting an asset—can let a trustee object and pull property into the estate, so accuracy matters. Because Alabama's amounts are inflation-adjusted and litigation occasionally reshapes how a provision is read, confirm the current figures before filing.

To verify the law itself, read the exemption statutes in Title 6, Chapter 10 of the Code of Alabama (available through the Alabama Legislature's official code site) and check the current adjusted amounts. For consumer questions and to confirm you are not relying on outdated information or a scam, contact the Office of the Alabama Attorney General, Consumer Protection Section, which handles consumer complaints and publishes guidance for Alabama residents. The Attorney General's consumer line is widely published as 1-800-392-5658. For case-specific advice, a bankruptcy attorney or a nonprofit credit counselor approved for your district is the safest source, because exemption planning depends heavily on your individual equity, residency, and timing.

The bottom line for Alabama: you keep your home equity up to roughly $15,000 (double for joint filers), $7,500 of flexible personal property that also has to cover your car, your essential clothing and family items, and 75% of your wages—all while being barred from the more generous federal exemption list and able to layer on federal nonbankruptcy protections.

Official Alabama Sources

This page is based on Alabama law. Limits and deadlines change — verify the current details directly with the official Alabama sources below. This is general legal information, not legal advice.

• Alabama Attorney General's Office - Consumer Interest Division — official Alabama agency.
• File a Consumer Complaint - Alabama Attorney General's Office

Federal law also applies. Federal laws like the Fair Debt Collection Practices Act and Fair Credit Reporting Act protect you nationwide, on top of Alabama’s own rules.