Bankruptcy in Alabama (2026): Exemptions & Means Test

Bankruptcy is governed by federal law, but the property you can protect when you file in Alabama is set largely by Alabama's own exemption statutes. Alabama has opted out of the federal bankruptcy exemptions, so filers here use the state list under Title 6, Chapter 10 of the Code of Alabama. This guide explains Alabama's exemptions, the Chapter 7 means test, and where cases are filed, with current figures dated so you can confirm they are still in effect.

This is general legal information, not legal advice, and it does not predict any outcome in an individual case. Exemption amounts and median-income figures change, so verify the current numbers before relying on them.

Federal vs. Alabama exemptions: an opt-out state

When you file bankruptcy, exemptions decide which property you keep. Federal law lets each state require its residents to use the state's own exemption list instead of the federal set in 11 U.S.C. 522(d), and Alabama has done exactly that. Under Ala. Code 6-10-11, an Alabama debtor's estate is exempt only to the extent provided by Alabama law and by federal laws other than the 522(d) federal bankruptcy exemptions.

In practice this means Alabama filers cannot pick the federal exemption menu. They use Alabama's state exemptions in Title 6, Chapter 10, combined with separate federal protections that exist outside the bankruptcy exemption list (for example, Social Security and most retirement accounts). About 35 states have opted out in this way, and Alabama is one of them.

Alabama homestead exemption

The homestead exemption protects equity in your primary residence. For most filers Alabama sets the homestead at $18,800, the adjusted amount effective April 1, 2024, covering a home and up to 160 acres. Ala. Code 6-10-2 states a base figure of $15,000, and Ala. Code 6-10-12 directs the State Treasurer to re-index the dollar amounts in the article for inflation every three years, with the Alabama bankruptcy courts publishing the current adjusted figures.

Alabama sets a much larger homestead for older residents and residents with a disability. Under Ala. Code 6-10-2(a), as amended by Act 2026-203 effective June 1, 2026, a resident who is either 62 years of age or older or an individual with a disability may claim a homestead valued at up to $56,400, roughly three times the general figure, on the same 160 acres.

Ala. Code 6-10-2(b) defines an individual with a disability by reference to Ala. Code 21-7-1 and lists the accepted proof. That includes a disability determination letter from the armed services, a state or federal government agency, a private insurer, or a workers compensation settlement agreement; receipt of benefits resulting from such a determination; or sworn affidavits from two physicians licensed in Alabama, at least one of whom is actively treating the qualifying condition.

Alabama also allows joint owners to stack the homestead. Ala. Code 6-10-2(a) provides that when a homestead is jointly owned, each owner is entitled to claim the exemption separately, to the same extent and value as an unmarried individual. Act 2026-203 deleted the earlier language that limited this to a husband and wife, so any co-owner who files may claim a separate exemption, and two co-owners who both file can roughly double the protected equity.

Because the amounts are re-indexed periodically, confirm the figure in effect on your filing date. Ala. Code 6-10-1(b), added by the same Act, provides that in a case filed under the Bankruptcy Code the amount of the debtor's homestead or other exemption is governed by the law in effect on the date the petition is filed. The next triennial adjustment under Ala. Code 6-10-12 applies to exemptions claimed on or after April 1, 2027.

Motor-vehicle and personal-property exemptions

Alabama does not have a stand-alone car exemption. Instead, it provides a personal-property exemption of $9,400 (effective April 1, 2024) under Ala. Code 6-10-6, which a filer can apply to a vehicle, household goods, or other personal belongings, except wages. Because this single allowance has to cover a car along with other property, equity in a paid-off or low-loan vehicle is a common planning concern in Alabama cases.

Like the homestead, this personal-property amount is indexed every three years under Ala. Code 6-10-12, and because the statute exempts the property of each resident, two people who both file can generally each claim it.

Wages are handled separately, and the operative rule is a state statute rather than federal law alone. Ala. Code 6-10-6 expressly excludes wages, salaries, and other compensation from the personal-property allowance and points to Ala. Code 6-10-7, which exempts 75 percent of a resident employee's wages, salaries, or other compensation from garnishment for contract debts and tort judgments. Under that section the garnishee retains 25 percent and pays only that portion into court.

Federal law adds its own ceiling. The Consumer Credit Protection Act at 15 U.S.C. 1673(a) limits garnishment to the lesser of 25 percent of disposable earnings for the week or the amount by which those disposable earnings exceed 30 times the federal minimum hourly wage, which can leave a low-wage earner protected in full.

The Chapter 7 means test in Alabama

The means test determines whether you can file Chapter 7. The first step compares your household's current monthly income, annualized, against the median family income for your household size in Alabama. If you are at or below the median, you generally pass and can proceed in Chapter 7; if you are above it, a second calculation of disposable income decides eligibility.

The U.S. Trustee Program publishes the median-income figures and updates them periodically. For cases filed on or after July 15, 2026, the Alabama medians are $64,321 for a household of one, $77,451 for two, $92,698 for three, and $106,740 for four, with $11,100 added for each additional person above four. These numbers change roughly twice a year, so check the current table at justice.gov/ust for your filing date.

Chapter 7 vs. Chapter 13 in Alabama

Chapter 7 is a liquidation bankruptcy. A trustee can sell non-exempt property to pay creditors, and most remaining qualifying debts are discharged, usually within a few months. Because Alabama's exemptions are modest, careful exemption planning matters, but many filers keep all or nearly all of their property.

Chapter 13 is a reorganization. Instead of liquidation, you repay some or all of your debt through a three-to-five-year plan, which can help you cure a mortgage default and keep a home or stop a foreclosure. Either way, filing triggers the automatic stay under 11 U.S.C. 362, which immediately stops most collection calls, lawsuits, wage garnishment, and foreclosure while the case proceeds.

Where you file in Alabama

Alabama is divided among three federal judicial districts, each with its own U.S. Bankruptcy Court: the Northern District of Alabama (Birmingham and surrounding areas), the Middle District of Alabama (Montgomery), and the Southern District of Alabama (Mobile). You file in the district that covers your county of residence.

The same Alabama state exemptions apply in all three districts, but local rules, forms, and procedures can differ. Before filing, completing a credit-counseling course from an approved provider is required, and a financial-management course is required before discharge.

What bankruptcy can and cannot do

Bankruptcy discharges many common debts, including credit cards, medical bills, personal loans, and most older unsecured debt. It cannot erase everything. Domestic-support obligations such as child support and alimony, most recent taxes, and most student loans generally survive a discharge, and debts from fraud may be challenged by creditors.

Because Alabama's exemptions are limited and the rules are detailed, many people consult a licensed Alabama bankruptcy attorney before filing to review which chapter fits and which property is protected. The figures here are current as of the dates noted; confirm the latest amounts before you rely on them.