Exemptions for Automobiles in Arizona Bankruptcy

When you file a bankruptcy in Arizona, you are allowed to exempt certain items and protect them from your creditors.  One of the items that may fall under the exemption scheme is your automobile.  Whether you have a car, truck or van, your vehicle may be protected by an exemption so that you can keep it even though you file bankruptcy.

Arizona vs. Federal Exemption Scheme

Each state is required to either adopt the federal exemption scheme for bankruptcy or generate their own.  Arizona is one state that has chosen to implement its own exemption scheme, which means that the exemptions available to Arizona debtors may not be the same as those available to debtors in other states.

Motor Vehicle Exemptions and Repossession

The specific exemptions regarding motor vehicles will determine whether a bankruptcy trustee can order your vehicle repossessed and returned to a creditor or sold to pay debts.  If you have less equity in the car than the exemption allows, the car cannot be sold.  However, if you have significantly more equity in your vehicle than is allowed under the bankruptcy exemption, it is likely that your vehicle will be sold to distribute funds to creditors. Even if your car is protected by the exemption, however, that does not mean that the creditor has no options.  In some cases, the creditor may be able to repossess a vehicle during or after bankruptcy, especially if the debtor does not make payments as agreed under a Chapter 13 plan.

Arizona Bankruptcy Exemption

Arizona allows you to exempt up to $6,000 of equity in a single vehicle and up to $12,000 if you are physically disabled. This means that if your vehicle is worth $6,000 or less, you can protect it completely.  If you have a loan on your car, you can protect up to $6,000 in equity, or the amount that your car is worth over and above your loan. If you are married and you and your spouse file a joint bankruptcy, you double the amount of exemption available for your vehicle.  Whether you can protect more than one car, however, will depend on how the cars are titled. Additionally, any insurance proceeds for a car that is totaled in an accident are also exempt by the same amount as if the exemption was applied to your vehicle.  Therefore, if you have an accident and total your car, you can still exempt up to $6,000 of your insurance proceeds. If you are considering bankruptcy, talk to the experienced attorneys at the Oswalt Law Group in Phoenix.