Bankruptcy Schedule C : Exemptions

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Many people who call our office start off with the belief that they will lose their property if they file a bankruptcy case.  Although it is possible to lose property when filing a bankruptcy case, there are several protections available that enable most people to retain all of their property when they file a bankruptcy case.  In some instances, this will require the person to file under Chapter 13, where the Debtor automatically retains all of his or her property and sets up a payment plan supervised by the Bankruptcy Court.   In the State of Alabama, our legislature has determined that Alabama will operate under state, rather than federal legislation for most of the bankruptcy exemptions available.   There are some federal statutes which apply where no Alabama law is applicable, such as for certain non-public pensions and IRA assets, social security, military benefits, etc.  

In Chapter 7 cases, the exemptions claimed on the debtor's Schedule C are important because they prevent the liquidation of the corresponding asset.   When filing a Chapter 7 case, the debtor is making a legal declaration that his or her property will be liquidated to pay creditors.  What constitutes exempt property depends on what is claimed on Schedule C, using the available Alabama exemption statutes, and applicable federal statutes.  The issue can be complicated when the debtor has recently moved to Alabama from another state.  In these instances, it is important for the attorney to know when the move was completed, and from which state the debtor arrived from.   In some instances, the debtor must claim the exemptions available from another state, choose the federal exemptions ( 11 U.S.C. 522)  

If you live in one of the following states you can use the federal bankruptcy exemptions: Alaska, Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin. If you don't reside in one of these states, then you cannot use the federal exemptions. You're limited to your own state's exemptions. 

The following summary is a list of the Alabama bankruptcy exemptions as of 2017: 

Homestead

6-10-2 - Real property or mobile home, up to $15,000. Property can't exceed 160 acres.

6-10-20 - Before an attempt to sell the home, a homestead declaration must be recorded.

Personal Property

6-10-5 - A burial place and a church pew or seat.

6-10-6 - Clothing, books, family portraits and pictures. 

Wages

5-19-15; 6-10-7 - For consumer loans, leases, and credit sales: 75% of weekly net income or 30 times the federal minimum hourly wage. For other cases: 75% of earned but unpaid wages. Judge may approve more for low-income debtors.  

Pensions

11 U.S.C. § 522 - Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans). 

11 U.S.C. § 522(b)(3)(C)(n) - IRAS and Roth IRAs to $1,283,025.

19-3B-508 - IRAs, Roth IRAs and other retirement accounts.

12-18-10 - Judges (for payments being received only).

16-25-23 - Teachers.

19-3B-501 to 503 - With certain exceptions, spendthrift trusts.

36-21-77 - Law enforcement officers.

36-27-28 - State employees.

Public Benefits

15-23-15 - Crime victims' compensation.

25-4-140 - Unemployment compensation.

25-5-86 - Workers' compensation:

31-7-2; 31-7-1 - Southeast Asian War POW's benefits.

38-4-8; 38-5-5 - Aid to blind, aged, and disabled; other public assistance, including earned income tax credit (In re James, 406 F.3d 1340 (11th Cir. 2005)).

Tools of Trade

31-2-78 - Arms, uniforms, and equipment required to be kept by state military personnel.

Insurance

6-10-8 & 27-14-29 - Life insurance proceeds.

27-14-31 - Disability proceeds up to an average of $250 per month.

27-14-32 - Annuity proceeds up to $250 per month.

27-14-29; 6-10-8 - Life insurance. proceeds and 100% cash value.

27-15-26 - Life insurance, if policy prohibits use to pay creditors.

27-30-25 - Mutual aid association benefits.

27-34-27 - Fraternal benefit society benefits.

Wildcard

6-10-6; 6-10-126 - $7,500 of any  personal property (except wages).

(Statute listing found at www.thebankruptcysite.org )  Alabama Bankruptcy Exemptions

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