Alabama’s exemption system sets a relatively high liquidation test floor for Chapter 13 filers with a car and home equity to protect — the state has no separate vehicle exemption, so a car’s value shares the same $9,400 personal property allowance as everything else you own. That combination often means Alabama filers see a higher minimum plan payment than filers in states with more generous, separately-categorized exemptions.
How Chapter 13 Works in Alabama
You file a petition and propose a repayment plan lasting three to five years. A standing Chapter 13 trustee collects your monthly payment and distributes it — secured debts first, then priority claims, then whatever’s left goes to unsecured creditors. You keep all your property throughout, and remaining qualifying unsecured debt is discharged when the plan completes.
The exemptions you claim set your plan’s liquidation test floor — the minimum unsecured creditors must receive. Alabama is an opt-out state, so filers must use Alabama's own exemption list rather than the federal exemptions. There's also no standalone motor vehicle exemption here - a car's equity comes out of the general personal property exemption instead.
How Alabama’s Modest Exemptions Affect Your Plan
Alabama’s homestead exemption protects $18,800 in home equity for a principal residence, on up to 160 acres. Increases to $56,400 for filers 62 or older, or with a qualifying disability, effective June 1, 2026. No standalone motor vehicle exemption. A vehicle's equity is protected only through Alabama's personal property exemption, shared with all other non-homestead property. Because there’s no separate vehicle allowance, filers with a paid-off car and other property often need their attorney to carefully allocate the $9,400 personal property exemption across everything, which can leave more exposed to the liquidation test than in states with categorized exemptions.
Why Alabama Filers End Up in Chapter 13
Mortgage arrears are the most common driver — catching up on missed payments without losing the house. Income above the means test threshold is the second major factor, and Alabama’s relatively modest exemptions mean even filers without extensive assets sometimes see a meaningful liquidation test floor once vehicle and personal property equity are combined.
Do You Qualify for Chapter 7 Instead? The Means Test
Alabama’s current median income figures:
- 1 person: $64,321
- 2 people: $77,451
- 3 people: $92,698
- 4 people: $106,740
- Each additional person: add $11,100
Filers above the median for their household size generally must commit to a five-year plan; those below can propose three years.
Mortgage Cure in Alabama
Filing Chapter 13 triggers the automatic stay, halting foreclosure immediately. The plan spreads mortgage arrears across its three-to-five-year duration while you resume regular payments going forward.
Vehicle Treatment and Cramdown
Even without a standalone vehicle exemption, Chapter 13’s cramdown option still applies: if your car loan was originated far enough before filing and the vehicle is worth less than the remaining balance, the plan can restructure the loan to the vehicle’s current market value at a court-approved interest rate.
Which Federal District Do You File In?
Alabama has three federal bankruptcy districts. Northern District of Alabama - Birmingham, Anniston, Huntsville, Tuscaloosa, Decatur
Middle District of Alabama - Montgomery, Dothan, Opelika
Southern District of Alabama - Mobile
How Much Does a Chapter 13 Attorney Cost in Alabama?
Chapter 13 attorney fees in Alabama typically run $3,000 to $4,500, on top of the 313 federal filing fee. Most of the fee is built into the plan itself.
Common Mistakes Alabama Filers Make
Not accounting for the lack of a separate vehicle exemption. Filers who assume their car is protected the way it would be in most other states can be surprised by a higher liquidation test floor than expected.
Missing required tax filings during the plan, which can trigger a motion to dismiss.
Overlooking a non-filing spouse’s income in the means test.
Not checking eligibility for the age-62/disability homestead increase, which can meaningfully lower the liquidation test floor for qualifying filers.
A Realistic Example
Consider a filer we’ll call Renee, living in Montgomery. She works in county administration and fell behind on her mortgage after a period of reduced hours. She owns her home with about $16,000 in equity and drives a car worth $7,000 with a small loan remaining.
Alabama’s $18,800 homestead exemption fully covers her home equity. Her $7,000 vehicle, combined with other personal property she owns, uses most of the $9,400 personal property allowance — her attorney factors the remaining exposed value into the plan’s liquidation test floor.
Her income lands above Alabama’s median for a household of two, so she commits to a five-year plan. The mortgage arrears are spread across the plan while she resumes regular payments. Five years later, the mortgage is current and the remaining unsecured debt is discharged.
Frequently Asked Questions About Chapter 13 Bankruptcy in Alabama
Can Chapter 13 stop foreclosure in Alabama?
Yes. Filing triggers the automatic stay, which halts foreclosure immediately. Your plan then spreads the mortgage arrears across three to five years while you resume regular payments.
Does Alabama have a separate car exemption in Chapter 13?
No. Alabama is one of the few states without a standalone motor vehicle exemption — a car’s equity shares the same $9,400 personal property allowance as everything else you own, which can raise the plan’s liquidation test floor.
How long does a Chapter 13 plan last in Alabama?
Three to five years. Filers with household income above Alabama’s median for their household size generally must propose a five-year plan; those below can propose three years.
Can I keep my car in an Alabama Chapter 13?
Yes — Chapter 13 doesn’t require giving up property. If your car loan is old enough and the vehicle is worth less than the loan balance, the plan may also cram down the loan to the vehicle’s current value.
What is the Alabama bankruptcy means test income limit?
It depends on household size and updates periodically. Current thresholds are roughly $64,321 for one person, $77,451 for two, $92,698 for three, and $106,740 for four, with $11,100 added per additional person.
Which bankruptcy district do I file in if I live in Birmingham or Montgomery?
Birmingham falls under the Northern District of Alabama. Montgomery falls under the Middle District.
Where to Verify the Details
Alabama’s exemption statutes are published in the Code of Alabama, Title 6, Chapter 10. For current means test figures, check the U.S. Trustee Program website.
Alternatives to Chapter 13 in Alabama
If you pass the means test and don’t need to cure a mortgage, our Chapter 7 guide for Alabama explains how straight liquidation might discharge your debt faster. For a state with more generous, separately-categorized exemptions, see our Chapter 13 guide for Georgia.
Last reviewed by American Debt Guide Editorial Team. Figures on this page reflect Alabama bankruptcy exemption amounts and federal filing data as of July 2026.