As a Phoenix, Arizona bankruptcy attorney I talk to quite a few people. Many of them have the common misconception that if they were to file bankruptcy they would lose everything that they own. This is not the case. The bankruptcy code provides that debtors may keep certain property that they own. The property a debtor is able to keep is known as exempt property. All of 11 U.S.C. § 522 deals with exemptions. The bankruptcy code provides for a federal bankruptcy exemption scheme. It also allows states to opt out of the federal scheme in favor of their own scheme. Arizona has opted out of the federal scheme as shown in A.R.S. 33-1133(B). This means that if you file your bankruptcy in Arizona more than likely you will have to use the exemptions provided by Arizona.
Federal or State Exemptions
So how do you tell whether state or federal exemptions will be used in your case? If you have lived in Arizona for the last 730 days you must use Arizona’s exemptions. If you have not lived in Arizona for the last 730 days you must use the exemptions of the state where you lived for the 180 days prior to the 730 days. If you didn’t live in one place for the 180 days you would use the exemptions of the state where you lived for the greater part of that 180 days. 11 U.S.C. § 522(b)(3)(A). Some states require you to be a resident of that state to use its exemptions. If you are required by the bankruptcy code to use such a state’s exemptions, it might make you ineligible for any exemption. In that case, you may use the federal bankruptcy exemptions. 11 U.S.C. § 522(b)(3). Since this law firm operates in Phoenix, Arizona, this article will be limited to Arizona exemptions.
Most of Arizona exemptions are found in Title 33 of the Arizona Revised Statutes. However some are “hidden” in other areas. Some of the more common property exemptions include a homestead, a motor vehicle, a bank account, wages and household goods and furnishings. Let’s discuss some of the Arizona exemptions.
If you own your residence you’ll be happy to know that Arizona allows for a $150,000.00 homestead exemption. To qualify for this exemption, the property must be your “interest in real property in one compact body upon which exists a dwelling house in which the person resides, interest in one condominium or cooperative in which the person resides, a mobile home in which the person resides or a mobile home in which the person resides plus the land upon which that mobile home is located.” A.R.S. 33-1101. This exemption applies only if you reside in the property. There is no exemption for rental or commercial property. Notice that it allows for your “interest”. To calculate your interest you will deduct any liens that are secured by the homestead. Your interest would be the value of the homestead minus any liens against the property.
Another common concern that debtors have is their transportation. In Phoenix, most people have a private vehicle for their transportation. Arizona allows a $5,000.00 exemption in a motor vehicle, per person filing. A.R.S. 33-1125(8). This can be combined in one vehicle or divided between two vehicles. A.R.S. 33-1121.01. If you are married, you would have a $10,000.00 combined exemption in one car or $5000.00 in each of two cars. If a person is physically disabled their allowed exemption in a motor vehicle increases from $5,000.00 to $10,000.00. Again, this allowance is your interest in the property. If you have a lien against the property, you would deduct that from the value of the property to determine your interest.
Bank accounts are another exemption that concerns almost everyone filing a bankruptcy. Arizona allows $150.00 per person in a single bank account. A.R.S. 33-1126(9). This exemption is also given on a per person basis. So, a married couple can combine their exemptions to $300.00 in one account or separate them into two accounts and have a $150.00 exemption each.
Household Goods and Furnishings are specifically identified and are exempt in an aggregate amount of $4000.00. In the event of a married couple, the amount is $8000.00. Some of the most common household items that are exempt are:
· 1 couch
· 1 living room chair per person in household
· 1 television
· 3 coffee or end tables
· 1 Dining table with four chairs, plus one chair for each dependant
· 1 Stove
· 1 Refrigerator
· 2 beds, with bedding, plus 1 bed for each dependant.
· 1 Dresser, 2 Nightstands and 1 lamp per bed.
Retirement accounts are generally exempt. There are several statutes that address retirement accounts. Please consult with your attorney to determine the exempt status of your retirement account.
Understanding what property you have that is protected, and that which is not, is critical in determining how a bankruptcy may affect you. Make sure you talk to an experienced attorney about all of your property before you decide to file a bankruptcy.
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