Income exemption in Alabama

[briansmith]

I read somewhere that 75% net income is exempt in Alabama. Is that the case or is all post filing income exempt? In reference to chapter 7.

[justbroke]

Be very careful. When wages are "exempt" from a bankruptcy, it is typically "earned but unpaid" wages. It does not include the money you have in the bank, on the date of filing, that were from earned wages. It would be things like earned vacation, or a paycheck that is for work that you performed before you filed, but before the employer paid you.

[briansmith]

Yea, I plan on my checking balance being around zero on day of filing. Just wanted to clarify how much, if any, of my paychecks will be going to the trustee. The ones earned and paid after filing. I've read different claims:1 being you keep all your earnings:
the other you keep 75% of your net pay which could equal several thousands of dollars if it took a while to be discharged.

[justbroke]

Your bankruptcy "estate" is created on the date that you file. Anything that happens after that date, as far as earnings, is not property of that bankruptcy estate. In other words, your earnings (accrued and paid or unpaid) after you file can not be taken by the bankruptcy "estate" accept in Chapter 13s (where you may be pledging your "disposable monthly income" (DMI) in order to have the protection of the bankruptcy stay).

So, if you have no unpaid income on the date of filing and everything else in your bank (or cash on hand) is exempt using an exemption, then none of your post filing income would need to go to the Trustee (with the Chapter 13 exception).

(Note: in a Chapter 13, you cannot exempt post-filing (post-petition) income since you pledge that you will surrender your DMI to the custody and control of the Trustee for payment to the unsecured creditors.)