Understanding Bankruptcy, Arizona Laws, and Debt Relief
To fully understand federal bankruptcy, Arizona laws have to be taken into consideration as well.
When a debtor files for bankruptcy protection, all of his or her interests in any real and personal property must be scheduled and described in detail. Importantly, state property statutes protect certain assets belonging to the debtor in bankruptcy. Arizona laws exempting property from the reach of creditors are matched to each item of the debtor’s assets listed in the bankruptcy schedules.
Not every debtor will be able to exempt every item of property, of course. But in bankruptcy, Arizona laws will exempt most of what the debtor owns. In many Chapter 7 cases, the Pew Law Center is able to claim exemptions for all or nearly all of the client’s property, preventing the case trustee from collecting that property, liquidating it, and distributing the proceeds to creditors.
When a debtor has assets in excess of what the state exemption statutes allow in bankruptcy, Arizona laws will not protect those non-exempt assets. In a Chapter 7, non-exempt assets of the debtor may be liquidated. However, a debtor in that situation may choose to file under Chapter 13, which would give him or her the opportunity to keep non-exempt assets while making payments to the case trustee under a repayment plan.
In Federal Bankruptcy – Arizona Laws Exempt Property
You may be wondering what types of property and assets are exempted in bankruptcy. Arizona laws protecting the debtor’s assets include the homestead exemption of up to $150,000 in value, the life insurance proceeds exemption of up to $20,000, the motor vehicle exemption of up to $5,000 in value, and home furnishings and furniture exemption of up to $4,000 in value. Those are only a few such exemptions typically used in bankruptcy – Arizona laws include many more exemptions though. Additionally, when both spouses file a joint petition in bankruptcy, Arizona laws double the value of exemptions on most items. (Sorry, the homestead exemption is not doubled when spouses file jointly.)