What Are the Alabama Bankruptcy Exemptions?
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Alabama residents of at least two years filing Chapter 7 bankruptcy will need to use the state’s exemptions to protect their personal property during the case. Alabama’s homestead exemption is $18,800, but will increase on July 1, 2026. It also offers a $9,400 wildcard exemption that you can use to protect most types of personal property, including a vehicle, with a few exceptions. Filers in Alabama can also use the federal non-bankruptcy exemptions to protect certain benefits and retirement funds.
Written by Attorney Karra Kingston. Legally reviewed by Jonathan Petts
Updated January 14, 2026
Why Are Alabama Bankruptcy Exemptions Important in Chapter 7 Bankruptcy?
Many people worry that filing Chapter 7 means losing everything they own. But in most cases, people who file in Alabama are able to keep all of their belongings. That’s because Alabama’s bankruptcy exemptions protect certain types of property — like your home, vehicle, clothing, and household items — up to a certain value. These laws are designed to help you maintain a basic standard of living while you get back on your feet.
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Does Alabama Allow Filers To Use Federal Bankruptcy Exemptions?
If you have lived in the state for at least two years when you file Chapter 7, you’ll need to use Alabama’s state bankruptcy exemptions. While the federal government has its own list of bankruptcy exemptions, Alabama residents aren’t allowed to use them according to state law.
That said, some federal protections apply no matter where you live. These are called federal non-bankruptcy exemptions. They can help protect certain benefits, like Social Security, veterans benefits, and most tax-exempt retirement accounts.
📌 To use Alabama’s exemptions, you must have lived in the state for at least 730 days (two years) before filing your bankruptcy case. This rule is intended to prevent individuals from relocating solely to take advantage of another state’s exemption laws.
📝 Alabama’s exemptions can be found in the Alabama Code. Alabama exemption amounts are adjusted for inflation every three years. The next change goes into effect on July 1, 2026.
What Are the Alabama Bankruptcy Exemptions?
Alabama’s bankruptcy exemptions fall into a few main categories:
🏠 Real property, like your home or land
🚗 Personal property, such as vehicles, furniture, clothes, and household items
💰 Intangible property and money, including wages, income, and public benefits
Each exemption has a dollar limit, and if your property falls within that limit, you’ll usually be able to keep it when you file Chapter 7.
Real Property Exemptions: The Alabama Homestead Exemption
Alabama’s homestead exemption is $18,800. This means you can protect up to that amount of equity in your home when you file for Chapter 7 bankruptcy.
💡 Equity is the current value of your home minus what you still owe on your mortgage. For example, if your home is worth $225,000 and you owe $207,000, you have $18,000 in equity. In this case, the state exemption would fully protect your home.
👥 If you're married and filing jointly, and both spouses own the home, you can double the exemption to protect up to $37,600 in equity.
If your equity is more than the exemption amount, the bankruptcy trustee could sell the home, give you the protected amount, and use the rest to pay your creditors. If you’re a homeowner, consider scheduling a free consultation with a local bankruptcy attorney before moving forward with your case. A legal professional can help ensure you’re able to protect important assets like a home.
Source: Ala. Code §§ 6-10-2, 6-10-3, 6-10-4, 6-10-12; most recent update noted by the Alabama State Treasury.
Alabama’s Personal Property Exemptions
Not everything you own is up for grabs in a Chapter 7 bankruptcy. In Alabama, certain personal items are fully protected under state law. These are things the state considers essential or too personal to lose, and they’re exempt no matter how much they’re worth.
👕 Here’s what Alabama fully exempts as personal property:
A burial plot and a church pew or seat
Clothing, books, and family portraits or pictures
Arms, uniforms, and equipment required by state military service
Source: Ala. Code §§ 6-10-5, 6-10-6, 31-2-78.
Wildcard Exemption
🎯 Alabama has a relatively generous wildcard exemption of $9,400.
Unlike many other states, Alabama doesn’t offer specific exemptions for things like your car, furniture, or household goods. That means the wildcard exemption is especially important. You can use it to protect essential personal property that isn’t covered elsewhere. Some people also use it to increase the protection on an item that's partially covered by another exemption.
Keep in mind that the wildcard can’t be used for real estate, wages, or other forms of compensation.
Source: Ala. Code § 6-10-6; most recent update noted by the Alabama State Treasury.
Alabama Exemptions for Income and Benefits
The last category of exemptions covers things like your wages, public benefits, retirement accounts, and insurance policies.
Wages
Under Alabama law, 75% of your take-home pay is protected from garnishment. This means a creditor can only take up to 25% of your net income (the amount you receive after taxes and other required deductions).
In most cases, this state rule offers more protection than the federal wage garnishment limits, so it's the one that usually applies in Alabama.
Source: Ala. Code § 6-10-7
Retirement Accounts
Most retirement accounts are protected when you file for bankruptcy, thanks to federal non-bankruptcy exemption laws.
Most common IRAs and employer-sponsored retirement plans are fully protected in bankruptcy under federal law. These include:
401(k)s and 403(b)s
Traditional and Roth IRAs
SEP and SIMPLE IRAs
Profit-sharing and money purchase plans
ERISA-qualified retirement plans
Certain pensions and retirement benefits for public employees are also protected. This includes:
Pensions for teachers, judges, and law enforcement officers
State employee retirement plans and annuities
Retirement and disability benefits for nonprofit or government workers
Sources: 11 U.S.C. §§ 522(b)(3)(C), 522(d)(12), and 522(n) and Internal Revenue Code §§ 401, 403, 408, 408A, 414, and 457
Money Benefits
Alabama law protects many forms of public assistance and insurance benefits in full or in part during bankruptcy.
The following types of public benefits are generally exempt up to their full value:
Crime victims' compensation
Unemployment benefits
Workers' compensation
Aid to the blind, elderly, and disabled
Public assistance programs (including the Earned Income Tax Credit)
Some insurance benefits are also protected:
Life insurance proceeds: fully exempt
Disability and annuity payments: exempt up to $250 per month
Mutual aid and fraternal benefit society benefits: fully exempt
Need Help Filing Chapter 7 Bankruptcy in Alabama?
Understanding how exemptions work can make a big difference in your bankruptcy case. The good news is that most people who file in Alabama are able to keep all of their property. And you don’t have to figure it all out alone.
If you have a simple Chapter 7 case, you may qualify to use Upsolve’s free filing tool. It walks you through each step and helps you prepare your forms without hiring a lawyer. We’ve helped thousands of people wipe out more than $950 million in debt, and our service is 100% free.
If your case is more complex or you’re not eligible to use our tool, we can connect you with a free consultation with a bankruptcy attorney in your area.
