What Are the Arkansas Bankruptcy Exemptions?

What Are the Arkansas Bankruptcy Exemptions and Why Are They Important in a Chapter 7 Bankruptcy? 

Most individuals file either Chapter 7 bankruptcy or Chapter 13 bankruptcy. If you don’t earn much income or valuable property, you’ll likely benefit more from filing Chapter 7 bankruptcy. This chapter of the Bankruptcy Code allows filers to eliminate eligible debts in about six months. Usually, you can have your debt eliminated without losing any of your property. That's because bankruptcy exemptions protect most, if not all, of your property from being sold by the trustee.

Does Arkansas Allow Filers To Use Federal bankruptcy exemptions?

Most states only allow residents to apply their specific state’s exemptions to their property. However, Arkansas is one of 17 states that allows most residents to choose between federal exemptions and state exemptions. You can only apply one set of exemptions to your case, so it’s important to compare the benefits and drawbacks of each before you commit. As long as you’ve lived in Arkansas for at least 2 years, you can choose whichever set gives you the best protection.

Arkansas Bankruptcy Exemptions

If you're married and are filing jointly with your spouse, it's important to note that you can generally double the exemption amounts listed below, as the values in this guide (unless otherwise noted) are available to single filers. But you can’t double exemptions for property that's not jointly owned.

Real Property: The Arkansas Homestead Exemption

If you're a landowner or homeowner, you’ll want to pay particular attention to this exemption. The federal homestead exemption allows a single filer to safeguard up to $27,900 of equity in their primary residence.

By contrast, Arkansas state law allows filers to take advantage of an acreage-based homestead exemption: Specifically, filers may claim an unlimited amount of equity in 80 rural acres or one-quarter urban acre - up to a total equity value of $2,500 in value. If the land isn’t worth $2,500, the acreage exemption amount increases to up to 160 rural acres and up to one urban acre, also up to a total of $2,500 in equity value.

Personal Property Exemptions

Arkansas law allows filers to exempt a minimal amount of personal property. Unless otherwise noted, filers can exempt the full value of these types of personal property:

• Clothing

• Health aids prescribed by a medical professional

• Up to $1,200 in equity in a single motor vehicle

• Up to $750 in value for tools of trade required for your profession

Money Benefits

Arkansas law does allow for the exemption of some benefits, insurance proceeds, and other monetary assets. Unless otherwise noted, filers can exempt the full value of these types of money benefits:

• Crime victims’ compensation

• Disability benefits

• Health insurance payments

• Life insurance payments

• Pension or retirement account – up to $20,000 in value

• Public assistance

• Tax-exempt retirement accounts, including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined-benefit plans (11 U.S.C. § 522(b)(3)(C).)

• Unemployment compensation

• Workers’ compensation

Other Arkansas Exemptions

Arkansas has a$200 wildcard exemption for individual filers that aren't ahead of household. Married couples filing jointly and single individuals classified as head of household may claim a $500 wildcard exemption value. A wildcard exemption allows filers to exempt property that's not otherwise exempt.

Federal Exemptions

Many filers find that Arkansas' state exemptions are very limited compared to the federal exemptions. You'll need to compare the two sets of exemptions and consider which property you want to protect as you decide which set to use. Here we'll dive into the federal exemptions more. The amounts listed below are for a single filer. The amounts are automatically doubled for married couples filing jointly.

If you’re thinking about using federal exemptions, keep in mind you'll have access to a $27,900 homestead exemption. If you don't use the homestead exemption, though, you can apply $13,950 of it to any other property of your choosing. That's in addition to the $1,475 wildcard exemption.

Federal exemption amounts are updated every three years. The following amounts are current as of April 1, 2022.

• Alimony or spousal support (total value)

• Child support (total value)

• Crime victims’ compensation (total value)

• Disability, illness, or unemployment insurance benefits (total value)

• Health aids and other health equipment (total value)

• IRAS and Roth IRAs (up to $1,512,350)

• Jewelry (up to $1,875)

• Life insurance policy (loan value up to $14,875)

• Life insurance policy for a lost loved one you depended on, which you currently need for support (total value)

• Lost earnings payments (total value)

• Public assistance and other public benefits (total value)

• Personal injury recovery (up to $27,900 – exceptions made for pain and suffering, as well as pecuniary loss)

• Personal property: Animals, appliances, books, clothing, crops, furniture, household goods, and musical instruments (up to $700 per item, up to $14,875 overall)

• Retirement accounts that are tax-exempt: 401(k)s, 403(b)s, defined benefit plans, money purchase plans, profit-sharing plans, SEP and SIMPLE IRAs (total value)

• Social Security benefits (total value)

• Tools of Trade: Books, implements, and tools of the trade (up to $2,800)

• Veteran’s benefits (total value)

• Unmatured life insurance policy except credit insurance (total value)

• Unemployment compensation (total value)

• Wildcard ($1,475 total plus unused homestead exemption value up to $13,950)

• Wrongful death recovery for loss of an individual you depended on for financial reasons (total value)

Filing Chapter 7 bankruptcy? 

After digesting all of this information, you still may be unsure about whether you’ll benefit more from applying Arkansas exemptions or federal bankruptcy exemptions. You may even be unsure of whether you want to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. If so, that's OK. You can connect with an Arkansas bankruptcy attorney for a free consultation to discuss your options. Upsolve may even be able to help you file your bankruptcy case for free.