Exemptions are laws that the Bankruptcy Courts follow to determine what assets may be available to pay your creditors. Which exemptions you use in your bankruptcy case vary depending on where you live and where you have lived for the past three years.
Alabama is an opt-out state, which means it does not use the Federal exemptions. The State exemptions allow each individual to claim a homestead exemption on their residence up to $15,500.00 and up to $7,750.00 of personal property. So, a married couple filing for bankruptcy who jointly own their home can claim as much as $31,000.00 of their equity exempt and as much as $15,500.00 of personal property, like cars, furniture, and money in the bank.
For most people seeking to file bankruptcy, those exemptions are more than enough to protect everything you own. The whole concept behind filing for bankruptcy is to give someone a fresh start. If they took everything you have, it would defeat the purpose of filing for bankruptcy.
In most cases, you can keep property over and above the value of your exemptions, but you need to have an accurate inventory of your property and discuss how this works with a bankruptcy lawyer before your case is filed.
Various forms of Individual Retirement Accounts and Life Insurance, for the most part, are 100% exempt from garnishment or levy from creditors, so they are usually 100% exempt from bankruptcy. However, other retirement products, such as an Annuity, may not be fully exempt.
An Annuity is a contract between you and your insurance company in which you make a lump sum payment and then receive regular disbursements from the insurance company over time. Under Alabama law, you can only exempt up to $250.00 per month. So, if you have the right to withdraw the money from the insurance company, then everything over the $250.00 is subject to being garnished by your creditors. If you are only entitled to $250.00 per month or less and nothing more, then the funds should be exempt in bankruptcy.
Again, it is very important that you speak with a bankruptcy attorney to review your assets and help you understand what is protected and what is not protected should you decide to file bankruptcy. Knowing what is protected, may also help you decide whether you should consider filing Chapter 13 instead of Chapter 7.
In Chapter 7, your assets are reviewed by a Chapter 7 trustee to determine what is exempt and what can be sold to pay your creditors. If you have a property with too much equity and you are concerned about losing it, you may have to consider other alternatives to bankruptcy or possibly file Chapter 13.
In Chapter 13, you propose a plan to repay your creditors over time, usually anywhere from 36 to 60 months. How much you must pay your creditors depends on your disposable income, but it also depends on the value of your non-exempt assets. Creditors must receive as much as they would receive in a Chapter 7. This is also known as the “Best Interest of Creditors Test”. So, if you have a property that is not exempt and subject to being sold by a Chapter 7 trustee, you must propose a plan that pays your creditors an amount that is at least equal to the value of this property. If you can claim the property exempt, then that property will not be included in your plan payment calculation.
Whether you are considering filing Chapter 7 or need a Chapter 13 instead, please talk with an experienced bankruptcy lawyer before you file.
If you are struggling to pay your debts and concerned about the future welfare for you and your family, it is important that you seek the advice of a bankruptcy lawyer to ensure that your assets are protected and the debts you seek to eliminate are dischargeable. Our attorneys have been assisting consumers and business owners with bankruptcy matters for over 25 years. If you are considering filing for bankruptcy, please consider contacting the Nomberg Law Firm. Our office number is 205-882-5005.
Steven D. Altmann has been a lawyer for more than 25 years. Steve has earned an AV rating from Martindale-Hubbell’s peer-review rating and was recently named a Super Lawyer and Top Attorney by Birmingham Magazine in the area of Bankruptcy Law.
We are a Federal Debt Relief Agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.