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Bankruptcy: Arkansas

Bankruptcy in Arkansas is designed to protect the interests of both debtors and creditors.  Petitioning for bankruptcy protection allows honest debtors relief from overwhelming debt, and enables creditors to be repaid to the extent that the debtor’s property or earnings permit.  16,117 bankruptcies were filed in Arkansas in 2010, ranking Arkansas 40th in the nation for the number of bankruptcy filings per capita.  55% of Arkansas bankruptcy petitions in 2010 filed for Chapter 7 bankruptcy.

Filing Bankruptcy in Arkansas

Federal law governs bankruptcy proceedings in Arkansas, with bankruptcy cases initiated in the US Bankruptcy Court.  Arkansas’ US Bankruptcy Courts are located in Little Rock, Fayetteville, Batesville, El Dorado, Ft. Smith, Harrison, Helena, Hot Springs, Jonesboro, Pine Bluff and Texarkana. Although the federal courts have exclusive jurisdiction over bankruptcy proceedings, Arkansas’ bankruptcy petitioners may choose between federal and state laws when deciding what personal property the petitioner is permitted to keep in bankruptcy and what must be sold.

Chapter 7 Bankruptcy, Arkansas

Chapter 7 bankruptcies in Arkansas are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who do not have 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 is not protected by Arkansas’ bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Arkansas’ 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.

Arkansas Bankruptcy Exemptions

Federal and Arkansas’ state laws designate specific property that debtors may keep in bankruptcy.   These designations are called “property exemptions.” The exemptions protect petitioners from literally having to sell the shirt off their back to pay off a debt owed to a creditor. Arkansas bankruptcy petitioners may choose property exemptions from the state or federal list.

Because Arkansas’ exemption amounts do not reflect inflation amounts after 3 yrs,   it is important to consult an Arkansas bankruptcy attorney or refer to codes and statues for up-to-date information. Arkansas’s key exemptions include:

Arkansas Homestead Exemption

  • Unlimited exemption: For a married person or head of family,  real or personal property used as residence to 1/4 acre in city, town, or village, or 80 acres elsewhere
  • $2,500 total: Real or personal property between 1/4–1 acre in city, town, or village, or 80-160 acres elsewhere,
  • $800 total: Real or personal property used as residence if single, $1,250 if married
  • Homestead may not exceed 1 acre in city, town, or village, or 160 acres elsewhere (Husband and wife may not double)

Arkansas Personal Property Exemptions

  • Personal clothing and wedding rings
  • $1,200 total: Motor vehicle
  • Prepaid funeral trusts and burial plot to 5 acres (if choosing Federal homestead exemption)

Arkansas Tools of Trade Exemption

  • $750 total: Implements, books and tools of trade

Arkansas Wage Garnishment Exemption

  • Earned but unpaid wages due for 60 days; in no event less than $25 per week

Arkansas Wild Card Exemption

  • $500 total: Any personal property if married or head of family; $200 if not married

Arkansas Public Benefits Exemption

  • Workers compensation and unemployment benefits

Arkansas Insurance Exemption

  • Annuity contract
  • Disability benefits
  • $500 total: Life, health, accident, or disability cash value or proceeds paid or due
  • $1,000 total: Mutual assessment life or disability benefits
  • Fraternal benefit society benefits
  • Group life insurance
  • Stipulated insurance premiums
  • Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors
  • Life insurance proceeds or avails if beneficiary isn’t the insured

Arkansas Pensions and Retirement Exemption

  • Disabled firefighters and police officers
  • Police officers, state police officers, school employees
  • $20,000 total: IRA deposits if deposited 1 year prior to filing for bankruptcy

Chapter 13 Bankruptcy, Arkansas

In 2010, 45% of debtors petitioned for protection under Chapter 13 bankruptcy in Arkansas.  Under Chapter 13, a court-appointed Trustee reorganizes debts and develops a 3-5 year repayment plan using the debtor’s future earnings to pay off creditors.  Chapter 13 petitioners usually keep most – or all – of their property.

How to File Bankruptcy in Arkansas

Arkansas bankruptcy exemptions can have a big impact on the decision to file, or not to file, for bankruptcy. For example, Chapter 7 may be the right choice for you if your major assets are exempt and your debts qualify for discharge. Every debtor’s circumstances are different; an Arkansas bankruptcy attorney can help you review your financial and legal options and advise which bankruptcy choice is most advantageous.

Bankruptcy Attorney: Arkansas

It is the responsibility of the bankruptcy petitioner to be aware of their rights and obligations as debtors.  An Arkansas bankruptcy attorney is well-versed in federal laws and state exemptions and can interpret the law on your behalf.  Given the complexity of most bankruptcy cases, the bankruptcy advice and professional guidance of an Arkansas bankruptcy attorney is worth the investment.