Chapter 7 Bankruptcy Exemptions in Arizona

The Bankruptcy Code is governed by federal law, which means that many aspects of bankruptcy such as the “automatic stay” apply similarly regardless of the state the petitioner lives and files in. However, it’s important to know that Arizona has legally opted out of many federal bankruptcy exemptions under the code. So people who file for bankruptcy in the state can obtain exemptions only according to state laws. This particularly pertains to property exemptions. State bankruptcy exemptions work similarly for both Chapter 7 and Chapter 13 bankruptcy in the state. If you are filing for a Chapter 7 bankruptcy, read below to find out which exemptions you may qualify for in the state:

Residential Property and Homestead Assets

Arizona’s homestead exemption allows debtors to exempt up to $150,000 equity value from any real property considered a home. Other real property may also qualify if it falls within Arizona’s homestead laws. The exemption is the same for single as well as married couples. You will have to contact a lawyer regarding which of your real properties can be exempted under the homestead exemption clause in the state.

Certain Types of Personal Property

The courts allow debtors to get exemptions for various items that can be considered “personal property.” Your personal property includes items you own like clothes, computers, guns, furniture, books, pet animals, musical instruments, health aids, and wrongful death awards among others. The state allocates a specific amount of each personal property as exemptions. For example, Chapter 7 petitioners can exempt up to $2,000 for a wedding ring. You should refer to Ariz. Rev. Stat. §§ 33–1123, 33–1125 and 33–1127 for more information, or ask an experienced bankruptcy lawyer.

Deposits

A debtor filing for bankruptcy can exempt up to $300 from deposits in one bank account. If you have multiple bank accounts, contact a bankruptcy attorney in Scottsdale to find out how you can obtain exemptions.

Motor Vehicles

Arizona has very specific exemptions for motor vehicles for Chapter 7 bankruptcy. The courts allow debtors to exempt up to $6,000 equity for each vehicle owned. Elderly petitioners or their elderly or disabled spouses can exempt up to $12,000.  Again, consultation with your legal counsel is essential.

Retirement Benefits and Pension Funds

Under federal rules, qualified retirement plans such as 401ks and IRAs, which have tax-exempt status, are also exempt in bankruptcy proceedings. Arizona upholds this rule. In addition, debtors who benefit from any type of state employee pension plan can obtain exemptions. Amounts will vary depending on the type of plan you have.  So let’s say you have $200,000 in retirement assets, you can still file and procure a bankruptcy discharge and still own your $200,000 in retirement accounts post-discharge.

Life Insurance Benefits

Up to $20,000 in life insurance that could be paid to a child or a living spouse can be exempted when filing for Chapter 7 bankruptcy. Cash surrender value will be considered for exemptions. Similar exemptions can be obtained for insurance plans that cover ill health, accidents or disability. Insurance claims for damages or destruction to property that is exempt will also be exempted from proceedings. There are many insurance exemptions, but there are also exceptions. It’s important to ask a highly qualified lawyer whether your insurance benefits can be exempted under Chapter 7 bankruptcy proceedings.

Child Support

Arizona exempts all child support or alimony payments from discharge when filing for bankruptcy. So filing for bankruptcy is not a valid reason to not pay court ordered alimony or child support.  You are your estate (after you die) will owe child support and alimony for life—and even then, your estate will be compelled to pay.

Fraternal Benefit Society Benefits

If you claim benefits from the Fraternal Benefit Society, they will all be exempted under Arizona law. To find out more about exemptions you can get when filing for Chapter 7 bankruptcy, contact an experienced bankruptcy lawyer or call Canterbury Law Group at 480-744-7711.