Tom McCutcheon
Federal courts in certain cases are required to use the law of the state that applies to a particular case and that is true to a certain extent in bankruptcy cases.
In bankruptcy cases different states allow people who file bankruptcy to keep different amounts of equity in their home and personal property and the bankruptcy court in a particular state uses those amounts set by the state that it’s located in.
For example, Florida has a very high exemption which allows debtors in bankruptcy to keep huge homes and Alabama has one of the lowest exemption amounts in the country.
This keeps a creditor from taking everything a person has. Historically, Alabama allowed $3,000.00 in personal property, plus clothing and family photos and books. Alabama allowed the debtor to keep the first $5,000.00 in home equity and if a married couple filed that added together to $10,000.00 in home equity.
All other property above the exemptions ($3,000.00 & $5,000.00) was sold and divided among the creditors or a debtor could file a plan to repay the creditors under bankruptcy Chapter 13.
On June 11, 2015, the Legislature changed the law as follows:
1. “The personal property of such resident, except for wages, salaries, or other compensation, to the extent of the resident’s interest, to the amount of seven thousand five hundred dollars ($7,500) in value, to be selected by him or her, and in addition thereto, all necessary and proper wearing apparel for himself or herself and family, all family portraits or pictures and all books used in the family shall also be exempt from levy and sale under execution or other process for the collection of debts. No wages, salaries, or other compensation shall be exempt except as provided in Section 5-19-15 or Section 6-10-7.
2. The homestead of every resident of the state, with the improvements and appurtenances, not exceeding in value fifteen thousand dollars ($15,000) and in area 160 acres, shall be to the extent of any interest he or she may have therein, whether a fee or less estate or whether held in common or in severalty, exempt levy and sale under execution or other process for the collection of debts during his or her life and occupancy and if, he or she leaves surviving him or her a spouse and minority of the child, or children, but the area of the homestead shall not be enlarged by reason of any encumbrance thereon or of the character of the estate or interest owned therein by him or her. When a husband and wife jointly own a homestead each is entitled to claim separately the exemption provided herein, to the same extent and value as an unmarried individual. For purposes of this section and Section 6-10-38 and 6-10-40, a mobile home or similar dwelling if the principal place of residence of the individual claiming the exemption shall be deemed to be a homestead.
Buckle up and drive safely.
256-764-0112
