The Arizona Motor Vehicle Exemption in Bankruptcy
Learn about the Arizona motor vehicle exemption -- it may help you keep your car in Chapter 7 bankruptcy.
The Arizona motor vehicle exemption helps determine whether you can keep your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy. Here you’ll find information about the Arizona car exemption: how much it is, what types of vehicles it covers, how it works for married couples, how to find the applicable statute, and more.
(For more information about exemptions, including how they work and which ones you can use, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Bankruptcy area.)
The Motor Vehicle Exemption and Your Car
Arizona’s motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors. If the equity in your car is less than Arizona’s car exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
The Amount of Arizona's Motor Vehicle Exemption
In Arizona, you can exempt up to $6,000 in equity in your car or other vehicle. If you are physically disabled, then you can exempt up to $12,000.
For example, if your car is worth $10,000 but you have a loan on it for $7,000, you have $3,000 of equity in your vehicle. If you file bankruptcy, you can exempt the entire $3,000 of equity with the Arizona motor vehicle exemption and keep your car.
The Federal Motor Vehicle Exemption
Some states allow bankruptcy filers to use the federal bankruptcy exemptions instead of state exemptions, but Arizona is not one of these states.
Can Married Couples Double Arizona's Motor Vehicle Exemption?
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. In Arizona, married couples can double the motor vehicle exemption. So if you are married and filing a joint bankruptcy, you can exempt up to $12,000 in equity in your motor vehicle.
(To learn about the advantages and disadvantages of joint bankruptcy filings, see Nolo's section on Bankruptcy Options for Married Couples).
What Vehicles and Insurance Are Covered by the Motor Vehicle Exemption?
The Arizona motor vehicle exemption applies to your car, truck, van, or other vehicle. However, you can only use it to exempt one motor vehicle. If your vehicle was exempt and it gets damaged or destroyed, the compensation or proceeds you receive for the damage are also exempt.
Checking Arizona's Exemption Laws
You can find Arizona’s motor vehicle exemption at Arizona Revised Statutes § 33-1125 (8).
You can find the Arizona statutes on the website of the Arizona State Legislature at http://www.azleg.gov/ArizonaRevisedStatutes.asp?Title=33. To learn how to find state statutes, see Nolo’s Laws and Legal Research area.
When the Arizona Exemption Amounts Are Updated
The exemption laws in Arizona change periodically. Be sure to check the current exemption amounts prior to filing bankruptcy.