Alabama’s Homestead Exemption Law Could Help Seniors and People With Disabilities

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For many homeowners, one of the biggest concerns about bankruptcy is whether filing could put their home at risk. Bankruptcy exemptions can help protect certain property, including a portion of the equity in a primary residence.

A new Alabama law that took effect June 1, 2026 significantly increased the homestead exemption available to residents who are at least 62 years old or who meet the law’s definition of an individual with a disability. The new exemption amount is $56,400 for qualifying residents.

Quick Answer

Alabama residents who are 62 or older or who qualify as an individual with a disability may now claim a homestead exemption of up to $56,400. For bankruptcy cases, the exemption amount is determined by the law in effect on the date the bankruptcy petition is filed.

What Is a Homestead Exemption?

A homestead exemption protects a certain amount of a homeowner’s equity from creditors.

Equity generally means the value of the home minus mortgages and other valid liens.

For example, if a home is worth $160,000 and the homeowner owes $110,000 on the mortgage, the homeowner has approximately:

$160,000 - $110,000 = $50,000 in equity

Bankruptcy exemptions can determine how much of that equity is protected when someone files Chapter 7 or Chapter 13.

What Changed Under Alabama’s New Homestead Exemption Law?

Before the new law took effect, Alabama’s generally applicable homestead exemption was $18,800 after inflation adjustments. Alabama periodically adjusts exemption amounts under its Consumer Price Index law. The State Treasurer lists the $18,800 amount as the homestead exemption effective from the 2023 adjustment cycle.

Effective June 1, 2026, Alabama created a much higher exemption for two groups:

• Residents who are 62 years of age or older
• Residents who qualify as an individual with a disability

For those residents, the law provides a homestead exemption of up to $56,400.

That increased protection can make a significant difference for someone who has accumulated equity in a home but is also struggling with overwhelming debt.

Concerned About Your Home Before Filing Bankruptcy?

A bankruptcy attorney may help you calculate your home equity, determine which exemption may apply, and identify potential property issues before you file.

Schedule a Free Consultation

Who Qualifies for the $56,400 Homestead Exemption?

A qualifying Alabama resident may use the higher exemption if the person is 62 or older.

Someone younger than 62 may also qualify if they meet Alabama’s legal definition of an individual with a disability.

The new law specifically incorporates the definition used in Alabama Code § 21-7-1. It also describes several ways a person may prove a qualifying disability.

Proof may include:

• A disability determination letter from the armed services
• A determination from a state or federal government agency
• A disability determination from a private insurer
• A workers’ compensation settlement agreement
• Receipt of benefits based on one of those disability determinations
• Sworn affidavits from two Alabama-licensed physicians

When physician affidavits are used, at least one physician must be actively treating the individual for the disability.

How Could the Higher Exemption Affect a Chapter 7 Case?

Chapter 7 trustees review a debtor’s property to determine whether there is nonexempt value that could be liquidated and used for creditors.

Consider a homeowner whose house is worth $160,000 and who owes $110,000 on the mortgage.

That leaves approximately $50,000 in equity.

Under a standard $18,800 exemption, a significant portion of that equity would remain nonexempt. That does not automatically mean the trustee would sell the home because selling costs, liens, ownership interests, and other factors also matter.

However, a qualifying senior or individual with a disability could potentially protect the entire $50,000 of equity using the new $56,400 exemption.

In that situation, the increased exemption could substantially reduce the amount of nonexempt equity the trustee would have to consider.

How Could the New Exemption Affect Chapter 13?

The increased exemption can also matter in Chapter 13.

Chapter 13 generally allows debtors to keep their property while making payments through a court-approved repayment plan. However, the value of nonexempt property can affect how much unsecured creditors must receive through that plan.

As a result, protecting a larger amount of home equity may reduce the amount of nonexempt property that must be accounted for when calculating a Chapter 13 repayment plan.

That can be particularly important for homeowners who rely on retirement income, Social Security, disability benefits, or other limited sources of income.

The New Law Also Changes Which Exemption Amount Applies in Bankruptcy

The 2026 law did more than increase the exemption for seniors and people with disabilities.

It also changed Alabama law so that, in a bankruptcy case, the applicable exemption amount is determined by the law in effect on the date the bankruptcy petition is filed.

That timing rule can be important when exemption laws change.

Someone considering bankruptcy should therefore avoid assuming that the exemption available today will necessarily be the same amount available at a later filing date.

Can Married Homeowners Claim Separate Exemptions?

Alabama law provides that when a homestead is jointly owned, each owner may claim the exemption separately to the same extent and value as an unmarried individual.

That means the analysis may be different for a married couple who jointly owns a home than for a single homeowner.

However, the available protection still depends on factors such as ownership, eligibility, equity, liens, and how the bankruptcy case is filed.

Does the Higher Exemption Guarantee That You Can Keep Your Home?

No.

The homestead exemption is an important part of the analysis, but it is not the only factor that determines what happens to a home in bankruptcy.

Other considerations may include:

• The current market value of the home
• Mortgage and other lien balances
• Whether the property qualifies as the homestead
• Ownership interests
• The bankruptcy chapter
• Payment status on the mortgage
• Other available exemptions
• Selling costs
• Recent transfers or changes in ownership

The exemption also does not eliminate a valid mortgage lien. A homeowner who wants to keep financed property generally must still address the mortgage obligations that apply.

What Might the New Alabama Homestead Exemption Look Like in Practice?

Imagine a 67-year-old Alabama homeowner with a house worth $180,000 and a remaining mortgage balance of $130,000.

The homeowner has approximately $50,000 in equity.

Because the homeowner is over 62, the new $56,400 exemption may be available. If all eligibility requirements are met, that exemption could potentially protect the $50,000 equity from the bankruptcy trustee.

Now consider a 50-year-old homeowner with the same house and mortgage who does not meet the disability requirements.

That homeowner would not qualify for the age-based $56,400 exemption, so a different exemption amount would apply.

The property is identical, but the exemption analysis may be different because of the homeowner’s eligibility under the new law.

Key Takeaway

Alabama’s new homestead exemption provides substantially more home-equity protection for qualifying residents who are 62 or older or who meet the state’s disability requirements. The higher exemption may affect both Chapter 7 property analysis and the amount that must be accounted for in a Chapter 13 repayment plan.

How May an Alabama Bankruptcy Attorney Assist?

A bankruptcy attorney may help by:

• Estimating the equity in your home
• Determining which homestead exemption may apply
• Reviewing proof of disability when relevant
• Evaluating mortgages and other liens
• Comparing Chapter 7 and Chapter 13
• Identifying nonexempt property before filing
• Reviewing how the filing date may affect applicable exemptions

Legal representation does not guarantee that a home will be protected or that a particular bankruptcy chapter will be available. Every case depends on the homeowner’s equity, debts, income, exemptions, liens, eligibility, and other circumstances.

Could Alabama’s New Homestead Exemption Apply to You?

If you are 62 or older, or you have a qualifying disability, Alabama’s new homestead exemption may provide additional protection for equity in your home.

Brock & Stout may be able to review your property, debts, and available exemptions and discuss how the new law could affect your bankruptcy options.

Schedule a free consultation to discuss your bankruptcy options.

Frequently Asked Questions

When did Alabama’s new homestead exemption take effect?

The law became effective June 1, 2026.

How much is the new homestead exemption for seniors?

Qualifying Alabama residents who are at least 62 years old may claim up to $56,400 under the new law.

Can someone younger than 62 qualify?

Yes. A younger resident may qualify if they meet Alabama’s statutory definition of an individual with a disability and satisfy the proof requirements.

Does the new exemption apply to Chapter 7 and Chapter 13?

The homestead exemption can affect both. In Chapter 7, it may protect equity from administration by the trustee. In Chapter 13, nonexempt equity may affect the amount unsecured creditors must receive through the plan.

This article is for general informational purposes and is not legal advice. Bankruptcy exemptions and other laws may change, and every case depends on its individual facts and circumstances.