Filing Bankruptcy in Arkansas: Exemptions Explained

Understanding the Arkansas Bankruptcy Exemptions

Whether you are filing Chapter 7 bankruptcy or Chapter 13, exemptions protect your real and personal property. Property that is nonexempt or not protected belongs to the bankruptcy estate. The bankruptcy trustee can sell those assets, and the funds received are used to pay creditors. Let’s review the Arkansas bankruptcy exemptions to understand better how this affects your case.

Last updated on January 27, 2025 to include Arkansas Bankruptcy Exemptions YouTube video.

Requirements to File for Bankruptcy in Arkansas

Arkansas divides the state into the Eastern and Western Districts. In the Eastern District, 1,777 Chapter 7 bankruptcies were filed in 2023, and 2,475 Chapter 13 bankruptcies. For the Western District, 762 Chapter 7 bankruptcies were filed versus 1,204 Chapter 13 bankruptcies. Arkansas bankruptcy statistics are available here.

Information on the Eastern and Western Districts, including contact information for the courthouse, judges, and staff, can be found via this link.

But before you consider filing for bankruptcy in Arkansas, you must meet the residency requirements. The residency requirements are part of the Bankruptcy Code and are the same for each state. In this case, there are two important dates to consider: 180 days and 730 days.

Bankruptcy Residency Requirements

Bankruptcy exemptions depend on how long you have resided in Arkansas.  If you have lived in Arkansas for 730 days or more, you would use the bankruptcy exemptions of Arkansas. That is known as the 730-day rule. If you don’t meet the residency requirements but have lived in Arkansas for at least 91 days, you would apply the exemptions of the state you previously resided in. This is known as the 180-day rule.

Because exemptions vary per state, it’s essential to know which state’s exemptions favor you if you recently relocated from or to Arkansas.

• Where to File for Bankruptcy: Understanding Residency Requirements

Arkansas Bankruptcy Exemptions

The Bankruptcy Code (Bankruptcy Abuse Prevention Consumer Protection Act) lists federal bankruptcy exemptions but allows states to choose between federal or state exemptions. This is why exemptions vary from one state to the next. Arkansas is one of the minority states that allow a debtor to choose either state or federal bankruptcy exemptions.

Because of this, it’s important to value your assets and review both sets of exemptions to determine which is more favorable. Let’s review the Arkansas bankruptcy exemptions, as seen in Article 9 of the State Constitution.

The Homestead Bankruptcy Exemption

Starting with the homestead exemption, ¼ of an acre is automatically protected regardless of the value. Up to an acre may be protected, but it can’t exceed $2,500 in value, which is very low and not likely. Rural areas are typically treated differently, and Arkansas is no exception since up to 80 acres are protected regardless of the equity value.

Now, let’s consider an example. The average home price in Arkansas is $208,238, according to Zillow. According to 24/7 Wall Street, based on a study by Experian, the average mortgage balance is $143,066. Subtracting the mortgage balance from the average home price means there is $65,172 in equity. Suppose the home was a 1/4 of an acre or less, then the full amount of equity would be protected. However, if the home was almost one acre, then subtracting $2,500 from the equity leaves $62,672 in nonexempt equity.

In the above-referenced example, if there is $62,672 in nonexempt equity, then Chapter 13 bankruptcy would have to be filed to protect the debtor’s home.

Motor Vehicle Exemption

The exemption for your car is up to $1,200. Here’s an example where maybe it’s best to choose the federal bankruptcy exemption, which is $4,450. To determine the value of your vehicle, you can consider credible sites such as Kelley Blue Book.

Personal Bankruptcy Exemptions

Not all states have what is known as the tools of the trade exemption, but Arkansas does. The tools of the trade exemption protect up to $750 in value for assets related to your business. For example, my computer would be considered a tool of the trade.

• How the Tools of the Trade Bankruptcy Exemption Works

Arkansas allows clothing to be fully exempt. Generally, most states include clothing as part of personal property. However, because the clothing is used, the value is minimal and usually doesn’t affect a bankruptcy case.

For other personal property, such as household goods, the exemption is $200 for an unmarried person not the head of the household versus $500 for a married person who is the head of the household. However, personal property such as household goods are appraised at garage sale value, otherwise known as fair market value, so the value tends to be minimal.

The Wildcard Exemption

Some states offer the wildcard exemption, which varies by state. Arkansas has a wildcard exemption, but the benefit amount varies depending on whether you are married or unmarried and are the head of the household.

If unmarried and not the head of household, the exemption is $200. However, it increases to $500 if married or the head of household. The wildcard exemption can be used to protect property that isn’t exempt.

If you’re facing financial difficulties and are ready for a fresh start, then when you file for bankruptcy, you or your bankruptcy lawyer will be dealing directly with the trustee.  it’s essential to understand the role of the bankruptcy trustee in Arkansas. The trustee plays a crucial part in the bankruptcy process, ensuring that it runs smoothly and fairly for all parties involved.

The Bankruptcy Trustee

The bankruptcy trustee handles a bankruptcy case whether Chapter 7 or Chapter 13 bankruptcy. As part of the trustee’s role is requesting important financial information whether from your or your lawyer. The trustee will be appointed automatically once the bankruptcy petition is filed. You can find contact information on the bankruptcy trustee 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.