If you’re overwhelmed with debt, filing for bankruptcy with the guidance of the Wright Law team may be the best path forward for relief and better days. It’s a big step, and it’s understandable to have a lot of questions, and maybe even some hesitation. At Wright Law Offices, bankruptcy is our specialty, and we’re honored to be able to help our clients navigate the bankruptcy relief process and discover a fresh start.

Commonly, we get asked about what property or assets are protected from creditors for a bankruptcy filing. Our team is ready to discuss your specific situation and bankruptcy options with you personally, but here are some basics about bankruptcy exemptions. Remember that the purpose of a bankruptcy isn’t to strip you of all of your belongings, leaving you with nothing; it’s to give you a fresh financial start, so the basics of bankruptcy exemptions are an important aspect of bankruptcy to understand.

What Are Bankruptcy Exemptions? 

When filing for bankruptcy, whether it’s Chapter 7 or 13, there is certain property that is protected and kept safe per state and federal law. If an asset is exempt, that means the bankruptcy trustee responsible for your case can’t seize it and sell it to pay off creditors to settle your debts. All property, even property you are claiming as exempt, must be listed on your bankruptcy schedules when filing. The exemption laws are strict, and incorrectly claiming something as exempt that doesn’t actually qualify can have serious consequences, so obtaining experienced legal counsel like Wright Law can help you determine what property can be claimed as exempt and how to apply Arizona’s statutes about value limitations.

Exemptions for Chapter 7 vs Chapter 13 Bankruptcies

In bankruptcy law, the same amount of property is protected for both Chapter 7 and Chapter 13. The main difference is that with exemptions in Chapter 7, the bankruptcy trustee appointed to your case will sell non-exempt property to pay your creditors. When it comes to property in Chapter 13 bankruptcy, you’re basically allowed to keep all of your property while paying off some of your debt in a 3-5 year repayment plan. The value of property that can’t be protected with an exemption is calculated into the repayment plan, so with exemptions in Chapter 13 bankruptcy, exempting all or most of your assets will help keep your monthly payment low.

State vs Federal Bankruptcy Exemptions

Both state and federal bankruptcy exemptions exist, allowing debtors to exclude certain property up to a certain dollar in value. When filing in some states (Arizona isn’t one of them!), you are given a choice between exemption systems, meaning you can choose whether you use the state exemption list, or the list of federal exemptions outlined by federal law, but you can’t mix and match exemptions from the two sets. Again, Arizona doesn’t give you a choice of exemption; you must go by the state exemption list.

What Are Federal Non-bankruptcy Exemptions?

To further protect your property when filing in a state like Arizona where you must use the state exemption list, you may be able to take advantage of other federal exemptions found outside the bankruptcy code, which are called federal non-bankruptcy exemptions. These are just like bankruptcy exemptions because they prevent certain assets from being sold by the bankruptcy trustee to pay your debts. However, they are harder to qualify for, as you must be part of a certain occupation or other specialized group.

For example, your retirement benefits are fully exempt if you are classified as one of the following: civil, foreign, or military service employee, railroad worker, CIA, Veteran, Military Medal of Honor Roll, or a Social Security benefit recipient. Death and disability benefits are fully exempt for longshoremen, harbor workers, and government employees, in addition to any received benefits for risk, hazard, injury, or death from war. There’s more to the list that qualify as non-bankruptcy exemptions, so get in touch with our law firm to discuss whether you fall under one of the categories.

Doubling Exemptions for Married Couples

If you are filing for a joint bankruptcy with a spouse, there is exempt property that can be doubled, meaning you can claim or take twice the amount. If you are filing Chapter 7, doubling will allow you to keep more of your property, and for Chapter 13, you’ll pay less to unsecured creditors as part of your repayment plan. You and your spouse can each take the full exemption amount on a piece of property as long as you each have ownership interest in the asset.

What is Exempt When Filing For Bankruptcy in Arizona?

Under Arizona law, if you are filing for bankruptcy, and have lived in Arizona for all of the two years previous to filing bankruptcy, you may claim the exemptions made by Arizona law. If you happened to have lived elsewhere during that time period, you must claim the exemptions provided by the state you resided in for the greater part of six months.

Here is a small sampling of some commonly assets that qualify as exempt property in Arizona:

  • Homestead Property Exemption. In Arizona, homestead exemptions mean that up to $250,000 of a home, condo, mobile home, or other property (plus the land) where you reside can be exempted, and therefore protected. This homestead statute states the amount cannot be doubled if filing with a spouse.
  • Motor Vehicles. Arizona’s exemption for motor vehicles allows you to protect up to $6,000 in one vehicle, or up to $12,000 if you’re elderly or disabled, or have a dependent who is.
  • Personal Property. For keeping property in bankruptcy, beyond a home and a vehicle, there is quite a bit that can be exempted as personal property, and all can be doubled for a spouse. Up to $6,000 (total fair market value) in household appliances, household furnishings, and electronics may be exempted. Other miscellaneous assets that have their own specific limits include a wide range of household items including: computers, musical instruments, sewing machine, typewriter, bicycle, firearms, books, a watch (sorry, but that Rolex is not going to be exempt), engagement and wedding rings, and more. Even household pets are listed. Again, it’s a very specific list outlined by Arizona statute, and that’s why having a personal bankruptcy lawyer on your side to best protect your assets and YOU is imperative throughout this process.
  • Life Insurance Benefits. A life insurance policy not greater than $20,000 payable to a surviving spouse or child, as well as payments to a beneficiary under any health, accident, or disability policy are subject to exemption.
  • Pensions & Retirement Plans. Various employee funds in pension plans are exempt, as well as funds in retirement accounts that are tax-exempt.

If you have a specific question about whether or not an asset of yours will be protected when filing for bankruptcy, please contact us. Every situation is unique, and we are more than happy to get you the information you need to rest easier and envision a brighter path forward free from financial stress.

Phoenix’s Best Bankruptcy Attorney

Bankruptcy proceedings can be daunting and certainly confusing, but you don’t have to go through it alone. In fact, you shouldn’t. At the Wright Law Firm, we’ve dedicated our careers to helping Arizonans file bankruptcy, and help our clients understand the exemptions in bankruptcy cases that are available.

If you have questions about bankruptcy, debt assistance, or loan modifications, call our team at 602-456-6085 or click here for a free consultation. Let us help you discover a fresh start.