Bankruptcy Law Blog

Monday, July 13, 2015

Recent Bankruptcy Law Changes Lead to Increase in Personal Property and Homestead Exemptions

What are the current asset thresholds and exemptions for consumer debtors considering a Chapter 7 liquidation or Chapter 13 restructure?

As a foundational principle, bankruptcy is an appropriate financial step for anyone whose debts and liabilities far exceed assets – and it is no longer feasible to make monthly debt payments without extreme hardship. While bankruptcy debtors are expected to be highly cash-strapped and tapped of most of their assets, the law does not mandate total poverty – and exemptions have been worked into the law to ensure debtors are able to keep some of what they have earned in both real and personal property assets. 

While the Bankruptcy Code is of course a federal statute, bankruptcy courts are often required to follow certain rules and procedures set forth by the state in which the debtors are situated. One such state law, known as the exemption threshold, varies significantly from one state to the next and dictates the amount of property a debtor may own in order to qualify for Chapter 7 or Chapter 13 bankruptcy proceedings. 

Alabama increases exemption thresholds 

Unlike its peninsular next-door-neighbor with one of the highest thresholds in the nation, Alabama’s threshold is one of the lowest in the United States – meaning debtors must be very insolvent before qualifying. However, in June, 2015, the Alabama legislature made substantial changes to its bankruptcy exemptions, resulting in broader eligibility criteria and greater opportunity for Alabamans to qualify. 

The personal property exemption refers to the amount of personal items a debtor may retain and still qualify for bankruptcy. Historically, Alabama only allowed an individual debtor to retain $3,000.00 worth of personal items, and up to $5,000.00 in equity on real property. If a married couple were to file for bankruptcy together, the home equity exemption would rise to $10,000.00. 

Under the recent changes in the law, however, individual debtors may now exempt up to $7,500.00 in personal property, and home equity up to $15,000.00 (for married couples). This jump was calculated to allow for more citizens to qualify for debt relief while still maintaining some semblance of financial integrity in the process. 

If you are considering a Chapter 7 or Chapter 13 bankruptcy proceeding, please do not hesitate to contact the Mobile and Baldwin County, Alabama bankruptcy attorneys at Padgett & Robertson today: 251-342-0264. 

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”

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