Bankruptcy can be a life-changing decision, in many ways. It can not only alleviate debt and give the filer a fresh start; it can also affect their credit record for years to come. Nevertheless, it does not have to cause them to lose all of their property. There are exemptions in place, in both federal and state laws, which allow a certain amount of property to be protected from liquidation under chapter 7 bankruptcy processes.
In Arizona, the state requires that only their exemptions apply; however, most consumer debt can be erased, except for tax debt, child support, most student loans, and alimony payments. The key is understanding how best to take advantage of those state exemptions.
How to Keep Your Car
State and federal exemptions differ in this area:
- Federal exemption – $3,225
- Arizona state exemption – $5,000 ($10,000 if the filer is disabled)
In addition, if that vehicle is security for a loan, the owner must continue to make regular payments or the lien holder may have the right to repossess it.
How to Keep Your Home
- Federal homestead exemption - $20,200
- Arizona state exemption – $150,000 in real property, including apartments and mobile homes
- Husband and wife may not double
- Sale proceeds exempt – up to 18 months after sale or new home purchased, whichever occurs first
In order to ensure a debtor keeps their homestead property, however, they must keep up any mortgage or loan payments secured by that property or the lien holder may still foreclose.
Arizona allows exemptions for other forms of personal property (which are subject to doubling):
- Wrongful death awards
- Funeral contract deposits – up to $5,0000
- Engagement and wedding rings – up to $1,000
- Food and fuel – up to 6 months
- Home furnishings, family portraits, pictures, paintings, and drawings created by the debtor, and appliances – up to $4,000 total
- Clothing – up to $500
- Pets and farm animals – up to $500
- Books – up to $250
- Musical instruments – up to $250
- A watch – up to $100
- Health aids
- Bicycle, sewing machine, typewriter, burial plot, firearm, and Bible – up to $500 total
- Proceeds of sold or damaged exempt property, prepaid rent or security deposits of $1,000 or 1.5 times rent (for those not claiming homestead)
- Bank deposits – up to $150 in one account
- Tools of the trade
- Teaching aids
- Tools, equipment, and books – up to $2,500
- Farm machinery and equipment – up to $2,500
- Military uniforms, arms, and equipment – all
Filing Schedule C of a Bankruptcy Petition
Any property exemptions must be enumerated in Schedule C of the bankruptcy petition. The information required in that form includes:
- A listing of the property being claimed
- The Arizona statutes that apply to those claims
- The exemption value of each property claim
- The current assessed value of each property claim (not the market value)
How to Find Help with Bankruptcy
These bankruptcy exemptions can make it well worthwhile for someone struggling financially to pursue this legal remedy. However, if the exemptions are not claimed correctly and wisely, it can destroy those benefits or delay them. With the help of a skilled bankruptcy attorney, you should be able to gain the most protection and debt relief possible, and begin again to establish a solid financial foundation.
