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Alabama Bankruptcy Laws
Current bankruptcy laws allow debtors to protect certain types of property from confiscation and liquidation under chapter 7 bankruptcy. However, while there are both federal and state exemption plans, Alabama allows debtors to use only state exemptions.
Alabama’s key exemptions include:
Homestead |
$5,000 |
Personal Property |
Burial plot, church pew, clothing, books, family portraits, plus up to $3,000 of other personal property |
Wages |
75% of those earned but not paid; 75% of weekly wages or 30 times the federal hourly minimum wage |
Pensions |
Tax exempt IRAs up to $1,095,000/person, judgments, spendthrift trusts, teachers, law enforcement officers, state employees |
Public Benefits |
Crime victim’s compensation; unemployment; worker’s comp; SE Asian POW benefits; assistance to the blind, aged, and disabled |
Tools of Trade |
Military uniforms, equipment, and arms |
Insurance |
Life insurance proceeds, disability or annuity up to an average of $250/month, mutual aid benefits, fraternal society benefits, |
Once a debtor and their lawyer determine which options are best for them, the debtor completes the requirement for credit counseling. The process then includes:
- Chapter 7
- Filing for bankruptcy, at which time the judge places a “stay” on all collections
- The court appointing a bankruptcy trustee to examine all debts and devise a plan
- Attending a 341 meeting with creditors to answer questions concerning debts and assets
- Discharging eligible debts
- Chapter 13
- A bankruptcy trustee is appointed to help devise a three- to five-year repayment plan
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