Arizona Requires State Exemptions for Bankruptcy

Exemptions are exceptions to the bankruptcy rules that allow the debtor to protect certain assets from seizure by creditors. Every state allows certain exemptions in connection with bankruptcy, but the particular amount and type of each exemption may vary from state to state. The state of Arizona requires that debtors who file for bankruptcy here follow the state exemption scheme. This is different from some states where the federal guidelines are the standard. While the Arizona exemption plan is similar in many ways to the federal plan, it is important for those who want to file bankruptcy to understand the differences and what they may or may not be allowed to exempt from their bankruptcy plan.

Filing for Chapter 7 or Chapter 13 Bankruptcy in Arizona

There are exemption rules that apply to both Chapter 7 or liquidation bankruptcies and Chapter 13 or wage-earner plans in Arizona. Here are a few rules that may be helpful in understanding the exemption scheme used by Arizona bankruptcy courts:

• Arizona requires debtors to use state exemptions. The state of Arizona has opted out of the federal bankruptcy exemption scheme, so state exemptions must be used for any bankruptcy filed in Arizona.
• Double exemptions for married couples. While doubling does not apply to homestead exemption, there are certain exemptions that double if a married couple files bankruptcy.
• Bank deposits. Arizona allows a certain amount of money in the bank to be exempted from the bankruptcy so that debtors are not left penniless. Currently Ariz. Rev. Stat. Ann. § 33–1126(8) allows for $300 in a single account to be exempted; other exemptions apply for couples.
• Fraternal Benefit Society benefits. Any benefits from a fraternal benefit society are completely exempt from bankruptcy under Ariz. Rev. Stat. Ann. § 20–877.
• Homestead exemption. Residential property has a complicated exemption scheme found at Ariz. Rev. Stat. Ann. §§ 33–1101, 33–1103 and 33–1104. Up to $150,000 may be exempted from the home’s value depending on the circumstances.
• Insurance benefits. Beneficiary payments may be exempt up to $20,000 under Ariz. Rev. Stat. Ann. §§ 33–1126(1), 1126(4), 1126(5), and 1126(6).
• Motor vehicles. Debtors may be able to exempt up to $6,000 between one or more motor vehicles, and in some cases couples, the elderly and the disabled may be able to exempt as much as $12,000 per Ariz. Rev. Stat. Ann. § 33–1125(8).
• Retirement benefits. Many debtors can exempt retirement benefits except for child support purposes under Ariz. Rev. Stat. Ann. §§ 33–1126 and 38–792.

There are also numerous exemptions for personal property, wages, unemployment benefits and other assets. Contact a bankruptcy attorney at Oswalt Law Group in Phoenix to learn more.