Protecting Assets with Exemptions
Every state has its own rules about what property can be protected during bankruptcy by "exemptions." Some states follow a federal exemption system, but Alabama follows only its own exemption system. One of the key reasons it is so important to retain an experienced Montgomery bankruptcy attorney is to make sure you are able to keep all the assets and property you are able to keep after filing for bankruptcy.Alabama Exemption System
When filing for Chapter 7 bankruptcy, Alabama exemptions determine what property you can keep. If an exemption is equal to or greater than your equity in the property, the property will be safe. When filing for Chapter 13 bankruptcy, Alabama exemptions will help set the amount you must pay to certain creditors.
Most of the time, each spouse in a married couple that files jointly in Alabama can claim the full amount of an exemption ("doubling"). This is an important feature because individual exemptions in a homestead are somewhat limited. Real property or a mobile home, for example, is protected up to $5000 and may not exceed 160 acres of land. A couple can protect $10,000 worth of equity in their home. For example, if you have a parcel of property worth $45,000 and the amount remaining on your mortgage is $40,000, you have $5000 worth of equity in your home. You and your spouse can protect the total amount of equity in your home with the $10,000 homestead exemption.
Unlike some states, there is no motor vehicle exemption in the Alabama system. However, many people use a "wild card" exemption to protect their car, truck or other vehicle when they file for Chapter 7. Alabama's wild card exemption allows you to protect your car (or any other personal property) so long as the total equity isn't more than $3000. For example, if you owe a dealership $10,000 on a motorcycle worth $20,000, you have $10,000 equity in that motorcycle. You cannot use the wild card exemption to protect the motorcycle.
In a different example, if you owe a dealership $18,000 on the same motorcycle, you have $2000 in equity in the motorcycle and it can be protected with the wild card exemption of $3000. There are occasions in which it would be too much trouble for the bankruptcy administrator to try to sell your motorcycle, and you can keep it in that case as well. You should be aware that a lender can still repossess your car, motorcycle or other vehicle, however, if you are overdue on payments and are unable to use a cramdown.
Alabama offers several other exemptions, including exemptions for personal property like clothing, books, family photographs, a burial place and a church pew. Tax exempt retirement accounts and various public benefits like unemployment compensation, workers' compensation, life insurance, and disability proceeds are also exempted. You can exempt 75% of weekly net income or 30 times the federal minimum hourly wage with respect to your wages.Protect Your Property With the Help of an Alabama Bankruptcy Attorney
To save as much as you can in bankruptcy, you should retain a knowledgeable Alabama bankruptcy lawyer who can review all the property you have and help apply exemptions. Grainger Legal Services has years of experience evaluating clients' finances and helping them through the intimidating process of filing for bankruptcy. We serve clients in the areas surrounding our offices located in Montgomery, Prattville, and Troy, Alabama. Call us at (334) 260-0500 or contact us online to schedule a consultation.