Even if a judgment has been entered against you, it may be possible to protect your income and assets without filing bankruptcy.
As I’ve written before, there are lots of ways to defend against a collection lawsuit, and if you’ve been served with lawsuit paperwork, you owe it to yourself to talk to a knowledgeable debt defense lawyer in your area. Answer the complaint and fight it.
But sometimes, you can lose despite your (or your lawyer’s) best efforts. What do you do then?
Well, for some people, bankruptcy might be a good option. For others, it is still possible (and definitely worth the effort) to try and negotiate a settlement of the debt, even after the court has entered a judgment against you.
But not everyone can afford to pay a settlement, and not everyone needs to file bankruptcy. If you only have a few assets and limited income, then it is possible that all of your assets are protected from your creditors’ post-judgment remedies. Each state has exemption laws that protect certain assets from garnishment or execution. Alabama’s exemption statutes are codified at Ala. Code Section 6-10-1, et al.
Alabama law allows judgment debtors to protect up to $7,500 of miscellaneous personal property, an unlimited value of clothing and books, and up to $15,000 of home equity in a personal residence. Additionally, Section 204 of the Alabama Constitution allows you to protect up to $1,000 of wages. Federal law specifically exempts retirement accounts like 401ks, and finally, the most commonly used exemption of all is probably the exemption for social security benefits. Exemption statutes like this are most often used in bankruptcy, but they apply equally well outside of bankruptcy.
If you’ve suffered a loss in court or a default judgment, then before filing bankruptcy, you may want to consider declaring a claim of exemption. Some courts have forms you can fill out, but the law is construed liberally to protect debtors from losing everything, so you can write your own claim of exemption as long as you file it properly and swear to its truth before a notary. Linked to this post is a form that I have used for clients in the past. You can find it HERE.
NOTE: This post is for informational purposes only and is NOT legal advice. Without reviewing all of the facts of a case, it is impossible to determine whether or not a given exemption may apply to your case or property. Consult a local lawyer before taking any legal action or using any forms you find here (or anywhere else on the internet).