Understanding Bankruptcy Exemptions: What Property Can You Keep?

Two people in South Alabama can owe the same amount of money and still have very different outcomes in bankruptcy. One rushes into a filing without understanding exemptions and risks losing property. The other sits down with a  top-rated bankruptcy attorney, reviews Alabama’s homestead and personal property protections, and files a case built around keeping a home, car, and retirement accounts while dealing with credit cards, medical bills, and old judgments. Both use the same court system, but only one uses the rules to full advantage.

Exemptions are the rules that protect certain property from creditors. They determine how much of your personal property is protected, and how Chapter 7 or Chapter 13 will treat your assets. Start by knowing the most important question clearly: “If I file, what property can I keep under Alabama law?”

You Can Keep Essential Property Through Alabama Exemption File

When you file a Chapter 7 or Chapter 13 petition, almost everything you own technically becomes part of the “bankruptcy estate.” Exemptions are the legal rules that carve property out and protect it from liquidation or, in Chapter 13, reduce what you must repay unsecured creditors. Federal materials on consumer cases emphasize that exemptions often include a home, clothing, basic household items, and retirement interests so debtors can pursue a genuine fresh start.

As of April 1, 2024, the homestead exemption is $18,800 per debtor and the personal property exemption is

$9,400 per debtor. Those figures are periodically adjusted for inflation, which is why relying on old numbers from an online list can be risky. Because Alabama has opted out of the federal exemption under Ala. Code § 6-10-11, individuals generally cannot claim the federal exemptions, but they still benefit from separate federal protections for Social Security, many retirement plans, and veterans’ benefits.

You Can Keep Your Home When Equity Falls Within the Homestead Limit

For many families, a house in Mobile or the surrounding area is the central concern. Alabama’s homestead exemption protects a portion of the equity in your primary residence and, as of April 1, 2024, covers $18,800 in equity per qualifying owner. If you are married and both spouses own and occupy the home, the protected amount can be higher because each owner may claim the homestead exemption.

In a typical Alabama Chapter 7 case, if your equity is entirely covered by the homestead exemption and you stay current on your mortgage, there is often little incentive for a trustee to sell the home. Chapter 7 trustees focus on non-exempt equity that can be turned into cash for creditors, while exempt property is generally left with the debtor. In Chapter 13, you usually keep your home and pay arrears and other debts through a three- to five-year plan; here, exemptions help calculate how much unsecured creditors must receive but do not usually require you to give up the house.

A bankruptcy lawyer will review your home’s current market value, your mortgage payoff, any judgment liens, and the exemption amounts to determine whether Chapter 7 is safe or whether a Chapter 13 reorganization is more likely to protect your home.

You Can Keep Vehicles and Household Goods Within the Personal Property Limit

Outside the home, the $9,400 personal property exemption is a powerful tool. Alabama’s personal property exemption can be applied to household goods, furniture, clothing, modest jewelry, and even equity in a vehicle. Unlike some states that list a separate “motor vehicle” exemption, Alabama allows you to use part of the personal property amount as a flexible wildcard for a car or truck, as long as the total value of the items you protect stays within the limit.

In practice, that means an older or moderately financed vehicle is often fully exempt, especially if your equity is modest. Exemptions commonly cover ordinary furniture, basic appliances, clothing, and similar household goods so people do not lose the essentials of daily life. A bankruptcy attorney in AL will group your belongings strategically so the personal property limit protects the items that matter most to you.

You Can Keep Income, Retirement, and Benefits That Are Protected

Another major worry is income: people often assume that filing means giving up paychecks and retirement savings. In reality, federal and state laws work together to protect many forms of income and savings. Exemption systems often shield Social Security benefits, certain disability payments, and retirement funds so debtors remain able to support themselves.

Under federal law, ERISA-qualified retirement plans such as most 401(k) accounts are broadly protected, and Congress has also established high dollar caps for traditional and Roth IRAs in bankruptcy—currently over $1.7 million for the 2025–2028 period, with separate rules for rollovers. Alabama law also provides exemptions for a portion of wages and for certain benefits, and these protections interact with federal bankruptcy rules to limit what creditors and trustees can reach.

In Chapter 13, instead of multiple garnishments, you make a single plan payment based on your disposable income; in Chapter 7, most collection activity stops immediately when your case is filed. An AL Mobile attorney can review your pay stubs, retirement account statements, and benefit records to ensure that protected income and savings stay sheltered while the bankruptcy process addresses unmanageable debt.

You Can Get the Best Help from a Seasoned Alabama Bankruptcy Attorney

Bankruptcy exemptions can shield your home, car, and essentials while you reset overwhelming debt. Hollinger Connor, LLC uses Alabama’s updated homestead and personal property limits to protect what matters most. Our bankruptcy lawyers in Mobile, AL tailor Chapter 7 or 13 strategies to your assets. We focus on clear guidance, stopping creditor pressure, and preserving property for families and small businesses. If you are ready to safeguard your property and rebuild, contact us today.