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Bankruptcy: Arizona

Filing bankruptcy in Arizona provides honest debtors the opportunity to get out from under crippling debt and permits creditors to receive some repayments based on the value of the debtor’s property or reliability of earnings.  41,589 bankruptcies were filed in Arizona in 2010, ranking Arizona 3rd in the nation for the number of bankruptcy filings per capita.  83% of Arizonan bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Arizona

Bankruptcy in Arizona is governed by federal law and all bankruptcy cases are initiated in the US Bankruptcy Courts in Phoenix, Tucson, Yuma and Flagstaff. Although federal courts have exclusive jurisdiction over bankruptcy proceedings, Arizonan petitioners are prohibited from choosing from the federal list of exemptions and instead are bound to Arizona law when determining what personal property the petitioner is permitted to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Arizona

Chapter 7 bankruptcies in Arizona are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who lack a significant amount of assets, such as investments and substantial equity in a home. This is because a Bankruptcy Trustee may liquidate personal property that isn’t protected by Arizona’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Arizona’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets are strictly off-limits to creditors looking for repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Arizona Bankruptcy Exemptions

Arizona’s state laws designate specific property exemptions that allow debtors to keep certain personal property and assets so they can move forward from bankruptcy and be productive members of society. Bankruptcy law in Arizona allows debtors to choose exemptions from the state or federal lists.

Property exemption amounts are subject to change, so it is important to consult an Arizona bankruptcy attorney before making a decision this important.  Arizona’s key exemptions include:

Arizona Homestead Exemption

  • May record homestead declaration to clarify which one of multiple eligible parcels is being claimed as homestead
  • $150,000: Real property, an apartment, or mobile home you occupy; sale proceeds exempt 18 months after sale or until new home purchased, whichever occurs first (Husband and wife may not double this limit)

Arizona Personal Property Exemption

  • $4,000 total: 2 beds and bedding, 1 dresser, table, lamp, alarm clock; 2 living room chairs, living room carpet or rug, couch, TV, radio, stereo, 3 lamps, 3 coffee or end tables pictures/ paintings/ portraits/ personal drawings; kitchen and dining room tables and 4 chairs; refrigerator, stove, washer, dryer, vacuum cleaner
  • $250: Books; $500: clothing; $1,000; wedding and engagement rings; $100: wrist/ pocket watch; pets, horses, $500: milk cows and poultry to; $250: musical instruments
  • $5,000 total: Motor vehicle to ($10,000, if debtor is physically disabled)
  • Health aids
  • Food and fuel to last 6 months
  • $500 total: Bible, bicycle, sewing machine, typewriter, rifle or pistol
  • $150 total Bank deposit in one account
  • $1,000 total: Prepaid rent or security deposit in lieu of homestead or 1-1/2 times monthly rent, whichever is less
  • Proceeds for sold or damaged exempt property
  • Wrongful death awards
  • $5,000 total: funeral deposits

Arizona Tools of Trade Exemption

  • Arms, uniforms and accoutrements of profession or office required by law
  • $2,500 total: Farm machinery, utensils, seed, instruments of husbandry, feed, grain and animals
  • $2,500 total: Tools, equipment, instruments and books
  • Library and teaching aids of teacher

Arizona Wage Garnishment Exemption

  • 75% of earned but unpaid weekly net earnings or 30 times the federal minimum hourly wage
  • 50% of wages for support orders (Low-income debtors may be authorized for more)

Arizona Public Benefits Exemption

  • Workers’ and unemployment compensation
  • Welfare benefits

Arizona Insurance Exemption

  • Health, accident, or disability benefits
  • Fraternal benefit society benefits
  • Group life insurance policy or proceeds
  • Annuity contract if beneficiary is dependent and owned at least two years
  • $20,000 total: Life insurance or annuity proceeds if beneficiary is spouse or child
  • Life insurance cash value if beneficiary is dependent and owned at least two years

Arizona Pensions and Retirement Savings Exemption

  • Public Safety Personnel Retirement System benefits, contributions, interest and credits
  • State employees retirement and disability
  • Only benefits accruing for Judicial employees, elected public officers, public employees and teachers, district employees, firefighters, police officers, rangers
  • Board of regents members, faculty and administrative officers under board’s jurisdiction
  • Other pensions, to extent wages exempt
  • ERISA-qualified benefits deposited more than 120 days prior to filing bankruptcy
  • Roth and traditional IRAs, medical savings accounts

Arizona Miscellaneous Exemptions

  • Alimony, child support needed for support
  • Minor child’s earnings, unless debt is for child

Chapter 13 Bankruptcy, Arizona

In 2010, 17% of debtors petitioned for protection under Chapter 13 bankruptcy laws in Arizona.  With Chapter 13, a court-appointed Trustee works on behalf of the petitioner to reorganize debts and develop a 3-5 year repayment plan, by which creditors are paid off using the debtor’s future earnings.  Chapter 13 petitioners keep most – or all – of their property.

How to File Bankruptcy in Arizona

Eligibility for property exemptions may have an impact on your decision to file for bankruptcy. With a choice of federal or state exemptions to consider, the goal is to determine which system will allow you to keep your major assets and qualify your debts for discharge.  Every case is different, and an Arizona bankruptcy attorney can help you review your facts and decide whether Chapter 7 or Chapter 13 bankruptcy is the best option for your situation.

Bankruptcy Attorney: Arizona

It is the debtor’s responsibility to know their rights and obligations as bankruptcy petitioners.  An Arizona bankruptcy attorney can break down and simplify the federal laws and state exemptions for those considering bankruptcy protection.  Personal bankruptcy cases can be incredibly complex and stressful, and the bankruptcy advice and guidance of an Arizona bankruptcy attorney in these situations is a worthwhile expense.