Understanding Bankruptcy Exemptions in Arizona
If you’re considering filing for bankruptcy in Arizona, it’s crucial to understand the state’s exemption laws. Bankruptcy exemptions determine what property you can keep when filing for bankruptcy, helping you get a fresh start. This is important because many times, people believe if they file for bankruptcy, they lose everything, but that’s not true. So, let’s review Arizona’s bankruptcy exemptions.
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Arizona Bankruptcy Exemptions
How Many Bankruptcies Are Filed in Arizona? For the year ending in 2023, there were 2,465 Chapter 7 bankruptcies filed. For Chapter 13 bankruptcies, a total of 3,641.
Arizona has opted out of the federal bankruptcy exemptions, meaning residents must use Arizona’s state exemptions if they’ve lived in the state for at least two years before filing. This is known as the 730-day rule.
If you have lived in Arizona for less than two years, then you would apply the exemptions of the state you lived in before. But to do so, you must have lived in Arizona for at least 91 days out of the last six months. You can read more about exemptions when moving from one state to another in the blog post below.
Also, note that the Bankruptcy Code in Section 522, requires that you have owned the home a total of 1,215 days for Arizona’s homestead exemption to apply.
The homestead exemption is $250,000. How exemptions work ultimately decides if your home or other assets are protected. For example, according to 24/7 Wall Street, the average home price in Arizona is $376,369. Per Mortgage News, the average mortgage balance is $264,696. Subtracting those two figures leaves $111,673 in equity. That figure is well below the $250,000 exemption, so in this case, the house is fully protected. But any equity above $250,000 wouldn’t be.
Motor Vehicle Exemption
The motor vehicle exemption protects your car. The same formula is used as above with the homestead exemption to the motor vehicle exemption to determine to what extent your car is protected.
Please note when researching, to check and double-check answers. In preparing multiple blog posts on exemptions, I routinely come across errors from well-known websites. It is common for websites to routinely cite the wrong exemption, even the wrong amount, especially if the amounts weren’t updated. At the minimum, I recommend confirming that the article was written by a lawyer and comparing it to multiple sources.
In this case, multiple cites wrongly cited the statute for the motor vehicle exemption. The correct statute is under Chapter 8, Article 2, Personal Property Exemption, Section 33-1125. A simple error in claiming an exemption could result in a minimum filing under the wrong bankruptcy chapter, having your case dismissed, or losing your assets.
I also know many people use AI, and all I can say is that AI is consistently wrong when it comes to legal issues. In this case, AI said the exemption is $6,000 when, in reality, it’s $15,000. So please, double if not triple triple-check your work.
Personal Property Exemptions
The exemption for personal property, such as household goods, is generous at $15,000. For the most part, your personal property should be protected because the resale value of such items is usually low.
Personal items include wearing apparel at a value of less than $500, musical instruments with a value not to exceed $400, horses, milk cows, and poultry with a value of $1,000 maximum, and engagement and wedding rings not exceeding more than $2,000. I wish more states would provide a wedding ring exemption, as most just lump it into a personal property exemption.
Other exemptions include a personal library collection not to exceed $250 and one watch not exceeding more than $250 in value. One exemption I found odd was including a typewriter. I honestly can’t remember the last time I saw one. But the typewriter gets lumped in with one computer, one bicycle, one sewing machine, and a family bible. This includes a lot of burial grounds, and the total should be less than $2,000.
For the burial ground or lot, many states also don’t provide that distinction which I disagree with. Unfortunately, too many times, I have seen an elderly couple lose their lots or worse, one spouse has passed, and the spouse cannot afford to buy the remaining lot, so the trustee takes it and sells it at auction.
Firearms are protected up to $2,000. Regarding firearms, please read the post below that discusses the difference between the Second Amendment and the right to bear arms versus the bankruptcy exemptions.
The full list of personal items under Arizona Statute 33-1125 can be found via this link.
Information on the Arizona bankruptcy trustee can be found via this link. The Arizona bankruptcy court information can be accessed via this link.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon books. To access my YouTube channel, click this link.
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Please note the information on this site does not constitute legal advice and should be considered for informational purposes only.
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