Filing for Bankruptcy in Arizona

Arizona's Bankruptcy Exemption List

Here are some commonly used Arizona bankruptcy exemptions.

Arizona Homestead Exemption

You can protect up to $150,000 of a home, condo, mobile home, or other property covered by the homestead exemption. This amount cannot be doubled. (Ariz. Rev. Stat. §§ 33–1101, 33–1103(A).)

Arizona Motor Vehicle Exemption

Arizona's motor vehicle exemption will allow you to protect up to $6,000 in one motor vehicle or up to $12,000 for an elderly or disabled debtor, an elderly or disabled spouse or dependent of the debtor. (Ariz. Rev. Stat. § 33–1125(8).)

Other Arizona Bankruptcy Exemptions

• Bank deposits. Up to $300 in a single bank account. (Ariz. Rev. Stat. § 33–1126(A)(9).)
• Personal property. Up to $6,000 in household furniture and appliances; $2,000 for bible, bicycle, sewing machine, typewriter, computer; funeral deposits to $5,000; firearms to $2,000; $500 for clothing; $400 for musical instruments; $800 for animals; $2,000 for engagement and wedding rings; $250 for books; $250 for a watch; wrongful death awards; $2,000 for prepaid rent or security deposit or 1.5 times the rent, whichever is less (instead of homestead exemption); youth teaching materials; and prescribed health aids. (Ariz. Rev. Stat. §§ 33–1123, 33–1125, and 33–1127.)
• Tools of the trade. Up to $5,000 in trade implements; $2,500 in farming tools if the debtor's primary income is from farming; all arms and uniforms that a debtor is legally required to keep are exempt; and library and teaching aids of a teacher. (Ariz. Rev. Stat. §§ 33–1130(1)-(3), (5)-(6).)
• Fraternal benefit society benefits. (Ariz. Rev. Stat. § 20–881.)
• Life insurance benefits. Up to $20,000 if payable to a surviving spouse or child; payments to a beneficiary under any health, accident, or disability insurance policy, subject to exceptions; destruction of, or damage to, exempt property claims; life insurance cash surrender value subject to exceptions. (Ariz. Rev. Stat. §§ 33–1126(A)(1), 1126(A)(4), 1126(A)(5), and 1126(A)(6).
• Alimony and child support. (Ariz. Rev. Stat. § 33-1126(A)(3).)
• Wages. The lesser of 75% of disposable earnings, or, earnings more than 30 times the federal minimum wage per week. (Ariz. Rev. Stat. § 33–1131.
• Pension benefits. Various employee pension systems are exempt. (Ariz. Rev. Stat. §§ 33–1126 and 38–792.)
• Qualified retirement plans. Tax-exempt retirement accounts (such as 401ks and IRAs) are exempt. (Ariz. Rev. Stat. §§ 33–1126(B).)
• Unemployment compensation. Exempt if not commingled with other funds except for court-ordered child support. (Ariz. Rev. Stat. § 23–783(A).)
• Workers' compensation. Exempt. (Ariz. Rev. Stat. § 23–1068(B).)

Arizona's exemption amounts are adjusted periodically. You'll find the exemption statutes on the Arizona State Legislature's website. To ensure you have the most recent figures, check for any updates on the Arizona Secretary of State's website.

Preventing Bankruptcy Exemption Problems

Exempt your property carefully. The bankruptcy trustee—the court-appointed official assigned to manage your case—will review the exemptions. A trustee who disagrees with your exemptions will likely try to resolve the issue informally. If unsuccessful, the trustee will file an objection with the bankruptcy court, and the judge will decide whether you can keep the property.

Example. Mason owns a rare, classic car worth $15,000, but the state vehicle exemption doesn't cover it entirely. Believing that the car qualifies as art—at least in his mind—Mason exempts it using his state's unlimited artwork exemption. The trustee disagrees with Mason's characterization and files an objection with the court. The judge will likely decide the vehicle doesn't qualify as art.

Purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

Qualifying for Bankruptcy in Arizona

You'll meet the initial requirement if you've never filed for bankruptcy before. Otherwise, check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.

You'll also need to meet specific chapter qualifications.

You'll qualify for Chapter 7 bankruptcy if your family's gross income is lower than the median income in your state for the same size family. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee's website (select "Means Testing Information").

Want an easy way to do this online? Use the Quick Median Income Test. If you make too much, you might still qualify after taking the second part of the "means test." If, after subtracting expenses, you don't have enough remaining to pay into a Chapter 13 plan, you'll qualify for Chapter 7.

Qualifying for Chapter 13 can be expensive because the extra benefits come at a hefty price, and many people can't afford the monthly payment. To qualify, you'll pay the larger of:

• your priority nondischargeable debt
• the value of nonexempt property, or
• your disposable income.

Find out more about calculating a Chapter 13 bankruptcy payment.