When you file for bankruptcy, it does not mean that you have to give up everything you own. Through what are known as “bankruptcy exemptions,” you can keep some or ALL of your assets safe, even during a bankruptcy. Bankruptcy exemptions can play a significant role in Chapter 7 and Chapter 13 bankruptcy. In Chapter 7, exemptions can help determine how much of your property you can retain while in Chapter 13, exemptions can play a part in keeping your plan payments low.
Many exemptions tend to safeguard specific types of property such as a car or pieces of jewelry that mean a lot to you, such as an engagement or wedding ring. Some exemptions protect up to a certain dollar amount of an asset and others can be applied towards any property that you own. If you can exempt an asset, you don’t have to worry about it being taken or having an effect on your bankruptcy proceedings.
As I explain in my book, exemptions play different roles in Chapter 7 and Chapter 13 bankruptcy. A Chapter 7 bankruptcy means liquidation of assets. The bankruptcy trustee in a Chapter 7 is looking to sell off your assets in order to pay your creditors. However, when you exempt property that qualifies for exemptions, you may be able to protect some or all of the property you own. This is exactly how exemptions help you protect your assets in a Chapter 7 bankruptcy. For example, Arizona has a $6,000 motor vehicle exemption. So, if you only have one car worth $5,500, then you can keep your vehicle.
A Chapter 13 bankruptcy allows you to keep all your property and essentially reorganize your debts. But, the amount you must pay certain creditors still depends on how much property you can exempt. The value of any nonexempt assets must be paid to unsecured creditors such as credit car companies. Therefore, in a Chapter 13 proceeding, exemptions help keep plan payments low by reducing the amount of money you are required to pay your creditors.
Arizona has laws in place that allow the state to opt out of federal bankruptcy exemptions. This basically means that the majority of those filing for bankruptcy in Arizona are only allowed to protect their assets using state laws. Here are some of the highlights of Arizona’s laws that address bankruptcy exemptions:
You may still be able to keep nonexempt property depending on the circumstances. If you are filing Chapter 7 or Chapter 13 bankruptcy, you need an experienced Arizona bankruptcy lawyer on your side. This can be a daunting process. Ask friends or family members for a legal referral. Do an Internet search for a local bankruptcy attorney. You can also find reputable bankruptcy lawyers by using the State Bar of Arizona’s website or other sites that rate attorneys.
Consider whether the attorney you are looking at has the experience level and personality of a lawyer with whom you would like to work. Evaluate whether he or she understands the complexity of your case and has the knowledge and resources to successfully represent you and achieve the most favorable outcome given your situation.
At Pew Law Center, we are dedicated to helping people get out of debt and take those first steps toward getting their lives back in order. If you are wondering if bankruptcy is the best option for you, call us to arrange a free, no-obligation debt-free strategy session. We are here to counsel you through what can be the most challenging time of your life.
Call (480) 745-1770 or fill out our contact form to get help from compassionate professionals. Stop worry and get help today.