Alabama’s Exemption Statute – Why so stingy? – Alabama Debtor’s Lawyer Judson E Crump

DID YOU KNOW? Alabama (No Longer) has the weakest exemption statute in the country.

This is a correction to a previous article I wrote, which has been made necessary by a positive change in Alabama law.

In January of 2015, I wrote the following article about Alabama’s exemption statute:

“What’s an exemption statute?

Say you get sued for a credit card bill.  Or a medical bill.  You either fail to answer the complaint or you lose a trial, and the court enters a judgment against you for $10,000.  What can that creditor now take from you to get it?  Wages can be garnished.  But what if you have no wages?  They can zap your bank account, but there is a limit: you are allowed to claim up to $3,000 of your property as exempt from execution.  This means they can’t take it.  You have to file a document with the court called a Claim of Exemption to ensure that this specific item of property (the bank account) is protected.  But once you do that, they’ll have to look elsewhere to satisfy a judgment.

The law that allows you to protect a chosen $3,000 of personal property is called the exemption statute.  Ours is found at Alabama Code Section 6-10-1, et seq.  

Our exemption statute was written in 1876.  It was part of the Alabama Constitution, really.  Article XIV of the Alabama Constitution of 1876 provided that “the personal property of any resident of this state to the value of one thousand dollars, to be selected by such resident, shall be exempted from sale on execution, or other final process of any court…”

So back in 1876, Alabama citizens could protect $1,000 of personal property from their creditors.  What is that today?  $21,000.  Yet our exemption statute today allows us to protect only $3,000.  So during the past 138 years, our protections for people in financial trouble have dropped to 1/7th (that’s 14.2%) of what we gave struggling working folks back in 1876.  We like to think that legal rights and government regulation have only increased since 1876.  Not so, my dear friends.

Similarly, the homestead exemption was $2,000.  In today’s money, that is $43,000.  Today it is $5,000.  So the past 138 years has been even worse for people trying to protect their homes.  Their protections have gone down to less than 1/8 of what they were back in the days of Jim Crow.

I hereby call on the legislature to pass a law that automatically updates the state’s exemption statutes each time the Crimson Tide wins a national championship, such that for every crystal football (or historical equivalent) added to the collection in Tuscaloosa, the amount of exempt personal and real property increases by $1,000.  If this policy were enacted in 1900, the citizens of this fair state would enjoy not the bullshit $3,000 and $5,000 (personalty and realty, respectively) exemptions that now drive them into penury, but $15,000 of personal property and $15,000 of homestead exemptions.  This would put us about right in the middle of the pack nationwide as far as debtor-friendliness goes.  And it would be attributable to the Bear and Saint Nick.  Roll Tide.”

To my shock and delight, the Alabama Legislature has changed the law.  On June 11, 2015, Governor Bentley signed Ala. Act No. 2015-484, which raised the homestead exemption to $15,000, and the personalty exemption to $7,500.  Even better, the law now requires these amounts to be adjusted for inflation every three years.  This improves the protections that our laws provide to struggling working folks.  Now, Alabama debtors have protections that are similar to those in the rest of the country.

At this point, I wonder something: the legislature re-wrote the exemption statute in June 2015 – five months after I published my article.  Coincidence?  Probably.  I’m 99% sure that no member of the Alabama legislature cares what I think.  But I’m happy for all of our working folks nonetheless.  A few years ago, I’d have never believed Robert Bentley would do anything for the poor.  Turns out, I was wrong on that.  Thank God.