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What Are the Arizona Bankruptcy Exemptions?

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In a Nutshell

Exemptions help you protect your property (from clothes to cars) and assets (like retirement accounts) in bankruptcy. There are both state and federal exemptions, but Arizona has opted out of the federal bankruptcy exemptions. That means, if you’ve lived in Arizona for at least two years when you file your bankruptcy case, you have to use Arizona's exemption laws. This article explores the exemptions available under Arizona law.

Written by Jonathan Petts
Updated July 1, 2024


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

Bankruptcy exemptions are the laws that determine what property you can keep after filing Chapter 7 bankruptcy. Bankruptcy is designed to give you a fresh start while also being fair to creditors.

Exemption protect your property so you can get that fresh start without starting over with nothing. Filers get to keep certain property (sometimes called assets) everyone needs to maintain a basic standard of living. The classic example is your basic household furniture or the vehicle you use to get to work.

Some assets go beyond a basic standard of living. This includes investment property, expensive jewelry, stocks, or luxury items (including expensive cars). If you own any of these assets, they can be sold by the bankruptcy trustee to repay some of your unsecured creditors in part or in whole.

Each state has a set of exemptions and the U.S. Bankruptcy Code includes the federal bankruptcy exemptions. When you file your case, you can claim exemptions based on the property you own. The The bankruptcy court then determines if those are valid.

Does Arizona Allow Filers To Use Federal Bankruptcy Exemptions? 

No. Arizona has opted out of the federal bankruptcy exemptions.

This means that if you’ve lived in Arizona for at least 2 years when you you file your bankruptcy, you have to use Arizona's exemption laws. Arizona law does allow the use of the exemptions for retirement accounts as set forth in the Bankruptcy Code.

The Arizona bankruptcy exemptions are outlined in the Arizona Revised Statutes, or A.R.S. Some filers are able to take advantage of certain federal nonbankruptcy exemptions to protect certain property such as Social Security benefits or retirement benefits for veterans.

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Arizona Bankruptcy Exemptions

Different kinds of property or assets have different exemption amounts under Arizona law. Here are some of the most commonly used exemptions in the Grand Canyon State.

Under Arizona law, certain exemption amounts are set to increase annual starting in January 2024 to account for increases in the cost of living. Double-check the state's statues to see the most up-to-date numbers.

Real Property: The Arizona Homestead Exemption

Arizona has one of the more generous homestead exemptions protecting your interest in real estate in the country. If you own your home, you can protect your equity up to $400,000. The amount is the same whether the home is owned by a single person or a married couple (A.R.S. § 33-1101).

If you don’t own your home, but had to pay a security deposit to your landlord, you can protect up to $2,000 of that deposit [A.R.S. § 33-1126(C)].

Personal Property Exemptions

Personal property is a broad category that includes everything from household goods and consumer electronics to food, fuel, and even your wedding ring. Different categories have different exemption amounts. Here are some of the most common personal protect exemption categories and amounts.

Household Goods and Furnishings

Arizona filers can protect household goods and furnishings, including consumer electronic devices, and household appliances with a combined resale value of up to $15,000 (A.R.S. § 33-1123).

Food, Fuel, and Provisions

You can protect up to six months’ worth of food, fuel, and provisions when you file bankruptcy in Arizona.

What does this mean for you? You can’t purchase gift cards or prepay for services, but you can stock up on paper towels, toilet paper, and whatever non-perishable items you have room to store.

The trustee may review your typical spending habits to make sure the money you spent in your pre-bankruptcy Costco run matches your average monthly expenditures. In that case, it’s also helpful to keep your detailed receipt so you can show the trustee that you didn’t buy items that are not protected, like jewelry. A.R.S. § 33-1124.

Personal Items

Unlike the homestead exemption, Arizona allows filers to double the exemption amount for personal property, such as vehicles, household goods, or wedding rings. As long as you use these personal items for a personal, family or household purpose.

Under Arizona Le (ARS 33-1125) you can protect the following items, up to the amount stated (doubled for married couples):

  • One motor vehicle with equity up to $15,000 (ARS § 33-1123)

  • If you or one of your dependents have a physical disability, you can protect equity of up to $25,000 in your car. 

  • Wearing apparel (clothes) with a combined fair market value of up to $500 

  • Musical instruments with a combined value of up to $400 

  • Hoses, milk cows, poultry with a combined value of up to $1,000

  • Engagement and wedding rings with a combined value of up to $2,000

  • Your library, including books, manuals, published materials and personal documents, with a combined value of up to $250

  • One watch of up to $250

  • One typewriter, one computer, one bicycle, one sewing machine, a family bible or a burial plot with a combined value of up to $2,000

  • Firearms - with a combined value of up to $2,000

There's no exemption limit for domestic animals and household pets or for professionally prescribed prostheses, a wheelchair, or a motorized mobility device.

Miscellaneous Other Personal Property

  • Most Arizonans who teach in any university, college, seminary of learning, or school use A.R.S. § 33-1127 to protect their library and philosophical and chemical or other apparatus used for teaching.

  • Arizona filers who participate in a commercial activity, trade, business or profession use A.R.S. § 33-1130 to protect the tools of their trade, including their website. 

Money Benefits

Not all types of property can be touched — some of it is in the form of money or benefits that you’re entitled to. Arizona bankruptcy exemptions under A.R.S. § 33-1126 protect the following money benefits or proceeds up to the amount stated: 

  • Up to $5,000 in your bank account. This amount is determined by the date your bankruptcy case is filed and based on the actual balance in the bank account at the end of the day and doesn’t take into account any pending transactions or checks you wrote that haven’t been cashed yet. 

    • If the money won’t be in their bank account until payday, Arizona filers use A.R.S. § 33-1131 to exempt 75% of these earned but not yet received wages.

  • A 529 College Savings Plan that you own or are a beneficiary under. There is no limit to this exemption but it doesn’t cover any funds you contributed to the plan in the two years before your bankruptcy filing. 

  • All money received (or to be received) by a surviving spouse on the life of a deceased spouse up to $20,000.

  • All money received (or to be received) by a surviving child on the life of a deceased parent or guardian up to $20,000. 

  • Minor child’s earnings - no limit

  • All child support and alimony received (or to be received) under a court order - no limit

  • Money or benefits received (or to be received) from an under an employer’s policy of health, accident or disability insurance or any similar employer benefit plan. While health savings accounts are not specifically mentioned in this provision, at least one Arizona bankruptcy judge has held that it does protect a health savings account through an employer plan. 

  • Insurance benefits in the form of money received (or to be received) from fire or other property insurance for otherwise exempt property that was damaged or destroyed. 

  • Any claim for damages (including any judgment obtained based on that claim) due to the levy or sale of exempt property.

  • Cash surrender value of life insurance policies the filer has owned for an uninterrupted two years before filing bankruptcy but only if the beneficiary of the policy is the surviving spouse, child, parent, brother or sister, or any other family member who is a dependent of the debtor. 

    • Arizona filers can also use A.R.S. § 20-1132 to exempt their interest in a group life insurance policy or the life insurance proceeds from that policy.

  • An annuity contract the filer has owned for an uninterrupted two years before filing bankruptcy but only if the beneficiary of the annuity is the filer, their surviving spouse, child, parent, brother or sister, or any other family member who is a dependent of the debtor.

  • Interest in an ERISA qualified retirement plan, including IRAS. Unlike the federal exemption for retirement accounts, this protection applies even if you inherit your interest in the account from someone. It does not protect any contributions made to the account in the 120 days (4 months) before filing the bankruptcy. 

    • If your retirement account is not inherited, you can also use the exemption for retirement accounts set forth under Section 522(b)(3)(C) of the Bankruptcy Code. Arizonans can use that provision of the federal law to protect qualifying retirement accounts even though Arizona is an opt-out state. This provision does contain a limit of  $1,362,800 for an individual debtor, so if you have more than that in your account, it probably makes sense to talk to a bankruptcy attorney about it. 

Other Arizona Exemptions

The exemptions outlined above can all be found in Title 33 of the Arizona Revised Statutes. But, Arizona state law includes other provisions that protect your property from creditors, both in the event of a Chapter 7 bankruptcy filing, or outside the context of a bankruptcy. These exemptions include the following:

Public Benefits

  • Unemployment compensation: Arizona filers can protect their unemployment benefits under A.R.S. § 23-783 as long as they keep the funds in a separate account. 

  • Workers’ compensation: Arizona filers can use A.R.S. § 23-1068 to protect their workers’ compensation benefits. 

  • Welfare assistance benefits: Arizonans receiving welfare assistance can use A.R.S. § 46-208 to protect their benefits from creditors.

Pensions

  • Arizona filers who are members of the Arizona Board of Regents use A.R.S. § 15-1628(I) to protect their  benefits, annuities as well as employee and employer contributions. 

  • Arizona filers who have a police officers’ pension use A.R.S. § 9-931 to exempt their pension. 

  • Arizona filers who have an interest in the Fire Fighters’ Relief and Pension Fund use A.R.S. § 9-968 to exempt their pension. 

  • State employees filing bankruptcy can use A.R.S. § 38-762 to exempt their survivor benefits before retirement.

  • Public Safety Personnel Retirement System benefits are protected by A.R.S. § 38-850(C). This exemption includes benefits and employee/employer contributions, including interest, earnings and all other credits.

  • Arizona filers who have an Arizona Rangers’ Pension use A.R.S. § 41-955 to protect their pension. 

Can You File Chapter 7 Without a Lawyer To Help With All This?

While exemptions may seem complicated, the vast majority of Chapter 7 filers find that all of their property is protected by exemptions and they don't lose anything. If you have concerns about whether certain property or assets you have will be protected if you file bankruptcy, you can schedule a free consultation with an Arizona bankruptcy lawyer to ask. If you have a complicated case, it can be worth hiring a lawyer to help ensure you receive all the protections the law entitles you to.

But if you're like most Arizonans filing Chapter 7, you may not need to hire an attorney to help. Upsolve has helped people all over the U.S. file successful Chapter 7 cases and get over $700 million of debt discharged... and our help is 100% free. Take this short quiz to find out if Upsolve can help you. 



Written By:

Jonathan Petts

LinkedIn

Jonathan Petts has over 10 years of experience in bankruptcy and is co-founder and CEO of Upsolve. Attorney Petts has an LLM in Bankruptcy from St. John's University, clerked for two federal bankruptcy judges, and worked at two top New York City law firms specializing in bankrupt... read more about Jonathan Petts

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