Depending on your state of bankruptcy, your assets may be in danger of liquidation. However, it is not a given that you will lose all or even most of your material possessions and financial accounts to pay off your debts. Alabama bankruptcy law allows debtors to claim a certain amount of exemptions.
When an asset is under an exemption, your trustee cannot sell it off to pay your creditors. With the variety of exemptions available, you have different ways to guard your assets.
Use state or federal exemptions
Both federal and state bankruptcy laws provide their own exemptions. You may choose one or the other, but not both. Depending on your circumstances, one set of exemptions may better protect your assets.
Specified exemptions
No matter which set of exemptions you choose, you should understand which assets you can exempt. Under Alabama law, just about any household property like your furniture or clothing is exempt, as are your retirement accounts. It is also possible to claim an exemption for a tax-deferred savings account.
Alabama exemptions also cover home equity, but only up to a certain amount. If you have a condo or a house with up to $15,500 equity, you may claim an exemption.
Wildcard exemptions
A wildcard exemption allows you to cover property you cannot otherwise exempt. You may protect items like valuable heirlooms that a trustee could otherwise sell off. Other examples include protecting financial accounts that other exemptions do not cover. If you choose Alabama exemptions, you may use wildcard exemptions to protect assets up to $7,550.
Flexibility with exemptions
There are other ways you might use exemptions to save assets. Some debtors combine wildcard exemptions with other exemptions to cover property of greater value. A judge may also extend an exemption to protect greater amounts or percentages of assets like your wages.
The best way to use exemptions will depend on your circumstances. Thanks to the options available, you may have less to fear from bankruptcy than you first thought.