In Alabama, the homestead exemption allows you to protect some of the equity in your home if you file for bankruptcy.
If you're considering filing for bankruptcy in Alabama, the Alabama homestead exemption will help you protect the equity in your home. This article explains how much the Alabama homestead exemption will cover and how to apply it in your bankruptcy case.
Homestead Exemptions Available in an Alabama Bankruptcy
In Alabama, you'll use Alabama's state exemptions and the federal nonbankruptcy exemptions. Although some states allow residents to use federal bankruptcy exemptions, this option isn't available in Alabama.
| | Alabama Homestead Exemption |
Homestead exemption amount | $16,450 |
Can spouses who file a joint bankruptcy double the exemption? | Yes |
Homestead exemption law | Ala. Code §§ 6-10-2, 3, 4, 12 |
Other information | Protects up to 160 acres; amounts are subject to change. |
Where to find other exemptions. | Filing for Bankruptcy in Alabama
Federal Nonbankruptcy Exemptions |
What Property Is Protected by the Alabama Homestead Exemption?
In Alabama, the homestead exemption applies to up to 160 acres of real property on which your home, condominium, or mobile home is located. To claim the homestead exemption, you must occupy the property as your principal place of residence. Learn more about protecting property when filing for bankruptcy in Alabama.
When Can I Use Alabama Bankruptcy Exemptions?
You can file for bankruptcy in Alabama after living there for more than 180 days. However, you must live in Alabama at least 730 days before filing. Otherwise, you'd use the previous state's exemptions.
If you lived in multiple states during the two years before filing for bankruptcy, you'd use the exemptions of the state you lived in for most of the 180 days before the two-year period that immediately preceded your filing. (11 U.S.C. § 522(b)(3)(A).)
Learn more about filing for bankruptcy after moving to a new state, the current amount of the federal cap, and other essential exceptions to homestead exemptions.
Do I Need to File a Homestead Declaration in Alabama?
In Alabama, you must file a homestead declaration before you file for bankruptcy to claim the homestead exemption. A homestead declaration is a form filed with the county recorder's office or office of the probate judge in your county to put your right to a homestead exemption on record.
Where Can I Find the Alabama Bankruptcy Homestead Exemption Statute?
You'll find Alabama's homestead exemption on the Alabama Legislature website in Alabama Code §§ 6-10-2, 3, 4, 12. Still, the best way to protect your assets is by consulting with a local bankruptcy lawyer.
What Else Do I Need to Do to Keep a Home in Bankruptcy?
If you can't protect all of your home equity, you might not be able to keep your home. Typically, the Chapter 7 trustee appointed to your case would sell the house, return the exemption amount to you, pay off the mortgage, and pay creditors with the amount remaining after deducting the trustee's fee.
In Chapter 13, you'd need to pay creditors the value of the nonexempt equity through the Chapter 13 plan. You can learn about other requirements you'll need to meet in Your Home in Chapter 7 or Your Home in Chapter 13.
Claiming the Alabama Bankruptcy Homestead Exemption
When completing your bankruptcy forms, you'll do the following:
- disclose your home on Schedule A/B: Property
- list your home and the homestead exemption law on Schedule C: The Property You Claim as Exempt, and
- if filing for Chapter 7, explain whether you plan to keep or surrender the home on Statement of Intention for Individuals Filing Under Chapter 7.
Because your home is likely your most valuable asset, consider consulting with a bankruptcy lawyer to ensure you can protect it in bankruptcy.
Need More Bankruptcy Help?
Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!
We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.
Updated September 15, 2023
FAQs
Homestead Exemption is granted to all Class III single family owner occupied properties. This exemption allows the property owner to deduct up to $4,000.00 in state tax and $2,000.00 in county tax from the total assessed value of the property. You must own and occupy the property as your primary residential address.
Who qualifies for homestead exemption in Alabama? ›
Regular homestead exemption is available to any Alabama resident who owns and occupies a single-family residence occupied as a primary residence and used for no other purposes.
What is the benefit of a homestead exemption in Alabama? ›
Under Alabama law, a Homestead Exemption is a tax deduction a property owner may be entitled to if he or she owns a single family residence and occupies it as his/her primary residence on the first day of the tax year (October 1st).
At what age do you no longer have to pay property taxes in Alabama? ›
If you are over 65 years of age, or permanent and totally disabled (regardless of age), or blind (regardless of age), you are exempt from the state portion of property tax. County taxes may still be due. Please contact your local taxing official to claim your homestead exemption.
What is the homestead exemption 4 in Alabama? ›
H4: Homestead Exemption 4 is available to all taxpayers of Alabama who own and occupy single-family residences, including manufactured homes, as their primary residences, use their property for no other purposes, AND who are age 65 or over with a combined taxable income of greater than $12,000 on their most recent ...
How much will a homestead exemption save me in Alabama? ›
Homestead Exemption is granted to all Class III single family owner occupied properties. This exemption allows the property owner to deduct up to $4,000.00 in state tax and $2,000.00 in county tax from the total assessed value of the property.
What is the property tax law in Alabama? ›
Assessed Value fixed by Alabama Constitution
Amendment 373 of the Constitution provides that all real and taxable personal property will be assessed at 20% of its fair market value. The combined state and local millage rate would then be applied to the assessed value.
What is the H1 homestead exemption in Alabama? ›
There are four types of homestead exemption. 1 . Regular Homestead Exemption (H1) is available to those who own and occupy single family residences and use this property for no other purpose. The amount of this exemption is $4,000 assessed value for state and $3,000 for county.
Does paying property tax give ownership in Alabama? ›
No. Paying taxes on property does not constitute ownership. State law allows taxes to be paid by persons other than the owner(s).
What is ad valorem tax in Alabama? ›
Ad valorem tax is a property tax, not a use tax, and follows the property from owner to owner. Therefore, unlike registration fees, taxes accumulate even when a vehicle is not used on the highway.
You must complete the appropriate application found on the website at www.revenue.alabama.gov. The applicable form will be ST: EX-A1 (For Wholesalers, Manufacturers, and Other Product Based Exemptions) or ST: EX-A1-SE (For Statutorily Exempt Entities).
Who is exempt from Alabama state taxes? ›
Alabama income taxes
Income from federal government, designated Alabama state and local government, and military retirement plans is exempt. Payments from traditional pension plans (i.e., defined benefit plans) and Railroad Retirement plans are also tax-exempt.
What happens if you don't pay property taxes in Alabama? ›
(Ala. Code § 40-1-3). Again, if you don't pay your property taxes in Alabama, the delinquent amount becomes a lien on your home. Once a tax lien is on your home, the taxing authority may hold a tax lien sale.
What does homestead property mean in Alabama? ›
A homestead exemption is defined as a single-family owner-occupied dwelling and the land thereto, not exceeding 160 acres.
What is the Alabama Code for homestead exemption? ›
Alabama Code § 6-10-3 (2022) - Homestead Exemption - Alienation by Married Person. :: 2022 Code of Alabama :: US Codes and Statutes :: US Law :: Justia.
How many Americans made claims through the Homestead Act? ›
Nearly four million homesteaders settled land across 30 states over 123 years. The Homestead Act of 1862 allowed anyone over 21 years of age or the head of a household to apply for free federal land with two simple stipulations: Be a citizen of the United States or legally declare their intent to become one.
What is the property tax on a second home in Alabama? ›
Class II property has a tax ratio of 20%. Property owners who own a second home are eligible for a Class III exemption even though not eligible for a homestead exemption. This drops the assessment ratio from 20% to 10%.
Do veterans pay property taxes in Alabama? ›
Summary Alabama Military and Veterans Benefits: Alabama offers special benefits for Service members, Veterans and their Families including state tax benefits, property tax exemptions, Alabama National Guard Tuition Scholarship Program, education and tuition assistance, vehicle tags, state employment hiring preference ...
