Certain personal property can be exempt or protected from liquidation during chapter 7 bankruptcy. These exemptions allow debtors to retain the property, usually up to a certain total value per category, while still discharging eligible debt.
Since bankruptcy is a federal proceeding governed by the United States Bankruptcy Code, there are federal exemptions. However, debtors in Arizona must use the Arizona bankruptcy exemptions which, in most cases, are actually more generous than their federal counterparts.
Arizona Homestead Exemption
During bankruptcy in Arizona, a debtor’s ownership interest in a home is protected up to $150,000. This means that if a debtor’s equity (home value – outstanding amounts owed) is less than $150,000, the home is exempt during chapter 7 bankruptcy.
If the equity equity exceeds $150,000, the home may be seized and sold so that the excess equity can be distributed to creditors. In this scenario, the debtor may be able to reaffirm the debt and retain the property, but then the debt related to the property would survive the bankruptcy. Our bankruptcy lawyers can help you protect your home.
If the debtor does not own a home, he or she may prepay rent in an amount not to exceed $2,000.
Automobile or Vehicle Exemption
Ordinarily, a debtor may retain up to $6,000 in equity for one automobile. However, if the debtor or a debtor’s dependent is disabled or elderly, the automobile exemption is $12,000.
Cash (Checking / Savings Accounts)
At the time the bankruptcy is filed, a debtor may have up to $300 in cash or money maintained in financial institutions.
Arizona debtors may retain household furniture, including electronics and appliances, worth no more than $6,000 in total.
Prepaid Food, Groceries, or Fuel
A debtor may purchase, in advance, the groceries and fuel needed to sustain the debtor and the debtor’s dependents for six months.
Debtors are allowed to retain clothing worth up to a total of $500. As one might imagine, used clothing is very difficult to accurately appraise.
Musical instruments valued up to a total of $400 are exempt from Chapter 7 bankruptcy.
Engagement or Wedding Ring
The Arizona bankruptcy exemptions allow debtors to retain wedding and engagement rings valued up to a total of $2,000.
Arizona debtors may retain one watch worth up to $150.
Arizona provides an exemption for the lesser amount of either 75% of the debtor’s disposable income (defined as earnings, including commissions and bonuses, after mandatory withholdings) or thirty times the federal minimum wage.