Can You Keep Your House or Car After Filing Bankruptcy in Alabama? Here’s What the Law Says
House and vehicle ownership are often the first concerns when Alabamians explore bankruptcy. The good news is that both Chapter 7 and Chapter 13 offer legal tools that can protect core assets, depending on equity, payment status, and exemptions. Alabama sets its own exemption amounts, and federal law supplies additional protections during the case. This overview explains what the law allows and what it requires, so you can discuss options with a trusted bankruptcy attorney in Mobile & Selma AL, who can provide precise guidance
Can You Keep Your House After Filing Bankruptcy?
You can, but it depends on several conditions.
Whether you keep a home turns largely on equity and payment status. Alabama’s homestead exemption shields a portion of your home equity from the bankruptcy estate. As of April 1, 2024, Alabama courts list the homestead exemption at $18,800 per owner, and the general personal-property exemption at $9,400. These amounts are updated periodically by the judiciary and matter in both Chapter 7 liquidation and Chapter 13 repayment cases. If your equity fits within the exemption and you are current on the mortgage, a Chapter 7 trustee typically has no reason to sell the property to pay unsecured creditors.
If you are behind on payments, Chapter 13 offers a structured path to save a home by stopping foreclosure and letting you cure arrears over three to five years while maintaining ongoing payments. The federal courts explain that Chapter 13 can halt foreclosure and allow delinquent mortgage payments to be spread across the plan term. You cannot change the lender’s basic rights on a home mortgage, but you may catch up past-due amounts while keeping the loan intact.
Exemptions are what make the home-retention math work. Federal law recognizes a debtor’s ability to claim exemptions that remove property from the bankruptcy estate, and public guidance explains how exemptions protect assets like a residence. In Alabama, you generally use state exemptions rather than the federal exemption scheme, so verifying the current dollar amounts before filing is essential.
Can You Keep Your Car After Filing Bankruptcy?
Cars are usually protected by a mix of equity coverage and loan strategy. Alabama does not have a separate vehicle exemption; instead, debtors typically apply the $9,400 personal-property exemption, often called a “wildcard” to cover car equity. If the equity after subtracting any loan is fully exempt, a Chapter 7 trustee generally will not liquidate the vehicle. If a loan exists, you must also keep payments current, and many debtors reaffirm the car note in Chapter 7, which keeps the personal obligation alive after discharge and lets them retain the vehicle, provided payments remain on time. The reaffirmation process and disclosures are governed by 11 U.S.C. Section 524(c) and related provisions.
Another Chapter 7 option, when feasible, is redemption under 11 U.S.C. Section 722, which allows you to keep the car by paying the lender the present replacement value of the vehicle in a lump sum, wiping out the rest of the loan balance; this is practical only if you can access funding for the single payment. In Chapter 13, you can usually keep a car by proposing a plan that pays the lender through monthly plan payments and cures any arrears, with the automatic stay preventing repossession while the plan is performed. The federal judiciary’s materials explain that the automatic stay stops collection and repossession activity once a petition is filed.
Wrapping Up
Keeping a house or car in Alabama bankruptcy depends on how your equity lines up with state exemptions, whether you are current on payments, and which chapter you file. Chapter 7 hinges on exemption coverage for vehicles, strategies like reaffirmation or redemption; Chapter 13 is designed to cure missed payments overtime while you maintain ongoing obligations. Because exemption amounts update periodically and every fact pattern is different, it is prudent to review the numbers and timelines with a bankruptcy lawyer in Mobile, AL, before filing.
For a focused conversation about your options under Alabama law, Loris Law Bankruptcy Law Firm will help you map a clear plan to tackle your bankruptcy-related concerns. Contact us today to schedule your free consultation.