Alabama Bankruptcy Guide

Complete guide to filing bankruptcy in Alabama, including current median income requirements, Alabama's homestead exemption up to $15,500, choice between state and federal exemptions, bankruptcy court information for both Alabama districts, and how to find qualified bankruptcy attorneys throughout Alabama.

Alabama Median Income for Bankruptcy (2026)

To qualify for Chapter 7 bankruptcy in Alabama, your household income must be below these median income levels. If your income exceeds these amounts, you may still qualify through the means test or need to file Chapter 13 instead.

Household Size	Annual Median Income	Monthly Median Income
1 person	$50,523	$4,210
2 people	$63,815	$5,318
3 people	$67,142	$5,595
4 people	$80,006	$6,667
5 people	$89,006	$7,417
6 people	$98,006	$8,167

Note: For households larger than 4, add $9,000 per additional person. These figures are updated annually by the U.S. Trustee Program.

Calculate Your Alabama Eligibility

Alabama Bankruptcy Exemptions

Alabama allows bankruptcy filers to choose between Alabama state exemptions and the federal bankruptcy exemptions. This choice is particularly important in Alabama because the state homestead exemption is quite low, making federal exemptions often the better choice.

Alabama Homestead Exemption

Up to $15,500 (or up to 160 acres).

Alabama's state homestead exemption protects up to $15,500 of equity in your primary residence. This is one of the lower homestead exemptions in the country. The exemption applies to real property including houses, condominiums, mobile homes, and land (up to 160 acres) that serves as your principal residence.

The property must be your principal residence at the time of filing bankruptcy. Alabama's homestead exemption protects up to 160 acres of land, which is generous for rural property owners, but the dollar value limit of $15,500 is quite restrictive.

Federal Exemption Alternative: Alabama filers can instead choose the federal homestead exemption of $27,900 ($55,800 for married couples filing jointly), which is significantly higher than Alabama's $15,500 state exemption. For most Alabama homeowners with any equity, the federal exemptions provide better homestead protection.

Alabama Vehicle Exemption

None under Alabama state law.

Alabama does not have a specific motor vehicle exemption under state law. However, Alabama has a $7,500 personal property exemption (see below) that can be applied to vehicle equity or other personal property of your choice.

Federal Exemption Alternative: The federal vehicle exemption is $4,450, plus federal exemptions offer a wildcard that can be applied to vehicles. For most filers, federal exemptions provide better vehicle protection.

Alabama State Exemptions

Alabama bankruptcy exemptions include:

• Homestead: $15,500 (up to 160 acres)
• Vehicle: None (use personal property exemption)
• Personal Property: $7,500 of any personal property
• Wearing Apparel: All necessary clothing
• Books: Family bible and books
• Burial Place: $10,000
• Tools of Trade: Included in personal property exemption
• Wildcard: The $7,500 personal property exemption functions as a wildcard
• Wages: 75% of earned but unpaid wages (or 30 times federal minimum wage per week, whichever is greater)

Federal Exemptions (Alternative Choice)

Alabama filers may choose federal exemptions instead:

• Homestead: $27,900 ($55,800 for married couples)
• Vehicle: $4,450
• Household Goods: $700 per item, up to $14,875 total
• Jewelry: $1,875
• Tools of Trade: $2,800
• Wildcard: $1,475 general + up to $13,950 of unused homestead (total $15,425)

Which Exemptions Should You Choose?

Choose Alabama state exemptions if:

• You own significant acreage (Alabama protects up to 160 acres)
• You have minimal home equity and want the $7,500 personal property wildcard
• You have valuable burial plots (Alabama allows $10,000)

Choose federal exemptions if:

• You have ANY home equity (federal $27,900/$55,800 vs Alabama $15,500)
• You're a homeowner with moderate equity (federal is nearly double Alabama's)
• You have significant household goods (federal $14,875 vs no specific Alabama exemption)
• You want the larger total wildcard ($15,425 federal vs $7,500 Alabama personal property)
• You have specific vehicle equity to protect (federal $4,450 vs Alabama having no vehicle exemption)

In Alabama, most homeowners choose federal exemptions because they provide significantly better protection.

Other Protected Assets

• Retirement Accounts: Fully protected including 401(k), IRA, pension plans, and government retirement benefits under federal law
• Public Benefits: Social Security, unemployment, workers' compensation, veteran's benefits, disability benefits, public assistance, crime victim's compensation
• Life Insurance: Life insurance proceeds if beneficiary is spouse or dependent; cash value up to $8,000
• Health Aids: All health aids
• Education Savings: Alabama 529 education savings plan (CollegeCounts)
• Personal Injury Awards: Personal injury recoveries up to $15,500
• Wrongful Death Awards: Wrongful death recoveries

Filing Bankruptcy in Alabama

Chapter 7 Bankruptcy in Alabama

Chapter 7 bankruptcy is commonly filed throughout Alabama. The process typically takes 3-4 months from filing to discharge and eliminates most unsecured debts including credit cards, medical bills, personal loans, and past-due utility bills.

To qualify for Chapter 7 in Alabama, you must pass the means test by having income below the Alabama median or by showing that after allowable expense deductions, you lack sufficient disposable income to fund a Chapter 13 repayment plan. You must also complete credit counseling from an approved agency within 180 days before filing.

Alabama's choice between state and federal exemptions gives you flexibility. Most Alabama homeowners benefit from choosing federal exemptions due to the higher homestead exemption ($27,900/$55,800 vs $15,500). Work with an Alabama bankruptcy attorney to determine which exemption set protects your assets better.

Learn more about Chapter 7 bankruptcy →

Chapter 13 Bankruptcy in Alabama

Chapter 13 bankruptcy allows Alabama residents to keep property while repaying some or all debts through a court-approved 3-5 year payment plan. This option is particularly beneficial if you're behind on mortgage or car payments and want to catch up while stopping foreclosure or repossession.

Chapter 13 is especially useful in Alabama if your income is too high to qualify for Chapter 7, if you have non-exempt assets you want to protect, or if you have priority debts like recent taxes or past-due child support. Your monthly payment is based on your disposable income after allowable living expenses.

Learn more about Chapter 13 bankruptcy →

Bankruptcy Courts in Alabama

Alabama is divided into three federal bankruptcy court districts:

Northern District of Alabama

Main Courthouses: Birmingham, Decatur, Anniston, Tuscaloosa

Covers northern Alabama including Birmingham, Huntsville, Tuscaloosa, Decatur, Anniston, Gadsden, and the northern portion of the state. Birmingham is the largest city in this district and handles the highest volume of bankruptcy cases.

Court divisions: Birmingham Division (central northern Alabama), Decatur Division (Huntsville area), Anniston Division (northeast Alabama), and Tuscaloosa Division (west-central Alabama).

Middle District of Alabama

Main Courthouses: Montgomery, Dothan, Opelika

Covers middle Alabama including Montgomery (state capital), Dothan, Auburn, Opelika, and the central portion of the state.

Court divisions: Montgomery Division (central Alabama), Dothan Division (southeast Alabama), and Opelika Division (east-central Alabama).

Southern District of Alabama

Main Courthouses: Mobile

Covers southern Alabama including Mobile and the coastal region. This district serves the southernmost portion of the state including Mobile Bay and the Gulf Coast.

You must file in the district where you have lived for the greater part of the 180 days before filing. Visit the U.S. Courts website for specific court locations, filing procedures, and local rules for each Alabama district.

Alabama Residency Requirements

To use Alabama bankruptcy exemptions (either state or federal), you must have been domiciled (legally residing) in Alabama for at least 730 days (2 years) before filing. If you've lived in Alabama for less than 2 years, you must use the exemptions from the state where you lived for the 180 days immediately before the 2-year period.

Alabama allows you to choose between state and federal exemptions once you meet the residency requirement. This choice is made at the time of filing and cannot be changed later, so careful analysis with an attorney is important.

Find an Alabama Bankruptcy Attorney

Most Alabama bankruptcy attorneys offer free initial consultations. Given the complexity of bankruptcy law and Alabama's choice between state and federal exemptions, consulting with an experienced Alabama bankruptcy attorney is highly recommended.

What an Alabama Bankruptcy Attorney Can Do

• Determine which bankruptcy chapter is right for your financial situation
• Compare Alabama state vs. federal exemptions to maximize asset protection
• Calculate whether you qualify for Chapter 7 using the Alabama means test
• Navigate Alabama-specific bankruptcy procedures and local court rules
• Complete and file all required bankruptcy paperwork correctly
• Represent you at the 341 meeting of creditors
• Handle any objections from creditors or the bankruptcy trustee
• Guide you through the entire process from filing to discharge

Cost of Filing Bankruptcy in Alabama

Chapter 7 bankruptcy attorney fees in Alabama vary by location:

• Birmingham metro area: $1,000 to $1,500 plus $338 filing fee
• Huntsville, Mobile areas: $950 to $1,400 plus $338 filing fee
• Montgomery, Tuscaloosa: $900 to $1,400 plus $338 filing fee
• Dothan, Auburn, Anniston: $850 to $1,300 plus $338 filing fee
• Other Alabama cities and rural areas: $750 to $1,250 plus $338 filing fee

Chapter 13 attorney fees typically range from $2,500 to $3,500 plus a $313 filing fee. In Chapter 13, attorney fees are usually paid through your repayment plan rather than upfront.

Many Alabama attorneys offer payment plans for Chapter 7 to make bankruptcy more accessible.

Alabama-Specific Bankruptcy FAQs

Can I keep my house in Alabama bankruptcy?

It depends on your equity and which exemptions you choose. Alabama's state homestead exemption of $15,500 is quite low. Most Alabama homeowners choose federal exemptions, which protect $27,900 (single) or $55,800 (married filing jointly). If your equity is within these limits, your home is protected. If your equity exceeds your chosen exemption, you may need to file Chapter 13 to keep your home.

Can I keep my car in Alabama bankruptcy?

Yes, in most cases. Alabama has no specific vehicle exemption under state law, but you can use the $7,500 personal property exemption. Federal exemptions provide $4,450 for vehicles plus potential wildcard. Most Alabama residents with car loans have minimal equity and can keep their vehicles by continuing to make payments through a reaffirmation agreement.

Should I choose state or federal exemptions in Alabama?

Most Alabama homeowners should choose federal exemptions. The federal homestead of $27,900/$55,800 is nearly double Alabama's $15,500. Federal also provides specific vehicle protection ($4,450) vs Alabama having no vehicle exemption. Federal household goods allowance ($14,875) is much better. Only choose Alabama state exemptions if you own significant rural acreage (Alabama protects up to 160 acres) or have minimal home equity with specific personal property needs. An attorney can analyze your situation.

Can I protect farmland in Alabama bankruptcy?

Yes. Alabama's state homestead exemption protects up to 160 acres of land, which is one of the most generous acreage allowances in the country. However, the dollar value limit is only $15,500. For valuable farmland with equity exceeding $15,500, you may need federal exemptions (if under $27,900/$55,800) or Chapter 13 to protect the property. Alabama farmers should consult bankruptcy attorneys experienced with agricultural issues.

How does bankruptcy affect my manufactured home in Alabama?

Manufactured homes (mobile homes) qualify for Alabama's homestead exemption if they serve as your principal residence. The exemption applies whether the home is on owned land or in a mobile home park (though land ownership affects value). The same exemption limits apply: $15,500 under Alabama state exemptions or $27,900/$55,800 under federal exemptions.

Can I protect my pickup truck in Alabama bankruptcy?

Pickup trucks are vehicles protected the same as cars. Under Alabama state exemptions, you'd use the $7,500 personal property exemption. Under federal exemptions, you have $4,450 vehicle exemption plus potential wildcard. Many Alabama residents use trucks for work—discuss with your attorney whether tools of trade exemptions apply if the truck is essential to your business.

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