Although most debtors who file bankruptcy in Arizona must use the Arizona exemptions, there are certain situations where another state’s exemptions or the federal exemptions may apply.

Some jurisdictions allow debtors to choose between state-specific bankruptcy exemptions and the federal exemptions to protect personal property from bankruptcy proceedings.

Unfortunately, Arizona is not one of those jurisdictions. Debtors who have lived in Arizona for at least two years must use Arizona’s bankruptcy exemptions.

The good news is that Arizona’s exemptions often are more generous than their federal counterparts (and many other state exemptions, too).

But what are bankruptcy exemptions?

Bankruptcy Exemptions

The term bankruptcy exemptions may be used to refer to certain categories of property protected by law from collection activity.

While it is far less common than wage or bank account garnishment, creditors who obtain a judgment can execute the judgment against the debtor’s property. This means that a debtor’s non-exempt property could be seized by a creditor to satisfy or partially satisfy a judgment against the debtor.

There are several categories of exempt property, including but not limited to:

  • the debtor’s primary home
  • automobiles
  • household furniture, furnishings, and appliances
  • food, fuel, and provisions
  • personal items
  • cash
  • tools or business equipment

These property exemptions also control what property is insulated from creditors when a debtor declares bankruptcy, particularly under chapter 7. During chapter 7 bankruptcy, a trustee is appointed to sell a debtor’s non-exempt property and distribute the proceeds to the creditors. Most of our clients retain all of their personal property even when filing chapter 7.

One of the benefits of chapter 13 bankruptcy is that it can enable a debtor to retain non-exempt property by adding its non-exempt value to the bankruptcy plan.

Arizona Exemptions vs. Federal Exemptions

Homestead. Starting with the largest and often most important exemption, Arizona’s homestead exemption allows homeowners to protect up to $150,000 of equity in their primary home. The federal exemption protects just $25,150.

Automobiles. Another category where Arizona’s exemptions are considerably more generous — debtors may protect up to $6,000 of equity in a single automobile (or $12,000 of equity if the automobile is specially equipped for physical disability of the debtor or the debtor’s dependents). The federal exemption protects $4,000 of equity in one automobile.

Household furnishings. Under Arizona law, this is a broad category that protects furniture and large household items like appliances and consumer electronics up to an aggregate value of $6,000.

There is no identical federal exemption, as its personal property exemption includes items that have their own exemption values under Arizona law. Overall, the federal personal property exemption protects up to $13,400 total, so long as no individual item is worth more than $625.

Food, fuel, and provisions. This is another subcategory exempt under Arizona law that does not have a perfect federal exemption exemption. Arizona allows debtors to protect “all food, fuel, and provisions” necessary for the next six months.

The vagueness of this statute has led to some dispute about its meaning. Federal courts have interpreted the exemption to apply to all food and fuel already in the debtor’s possession when the petition is filed.

Personal items. We previously covered the broader federal exemption that allows debtors to protect a total of $13,400 of personal property provided that no individual item’s value exceeds $625. Arizona’s personal item exemption provides several subcategories of exempt property — the values provided are totals for the entire category:

  • Clothing worth up to $500
  • Musical instruments worth up to $400
  • Horses, cows, or poultry worth up to $1,000
  • Engagement and/or wedding rings worth up to $2,000
  • Books worth up to $250
  • One watch worth up to $250
  • One computer worth up to $2,000
  • Firearms worth up to $2,000
  • Cash or funds in a bank account up to $300

Arizona’s exemptions also allow debtors to retain all wheelchairs or mobility devices and prosthetic devices for the debtor and/or the debtor’s dependents. It also exempts household pets and domestic animals.

Tools of trade. Arizona exempts tools and equipment used for commercial purposes worth up to a total of $5,000. The federal exemption protects up to $2,525.

Wildcard. The federal exemptions do provide a ‘wildcard’ exemption of up to $1,325 to protect any property otherwise non-exempt. Debtors who do not use the homestead exemption may increase the wildcard exemption to $12,575. Unfortunately, Arizona does not provide a wildcard exemption.

So for the most part, Arizona’s exemptions are more generous than their federal counterparts. But debtors must reside in Arizona for at least two years before they can use Arizona’s exemptions to protect property during bankruptcy.

Debtors new to Arizona who do not meet this residency requirement still may file in Arizona once they have lived here for at least ninety days, but their previous residency will control what exemptions are available.

If you live in Arizona and are considering filing bankruptcy, take advantage of a free consultation with one of our experienced attorneys. We can answer all of your questions, walk you through the process, and help you decide if bankruptcy is the right choice for you.

As always whenever we talk about state or federal law, these amounts are subject to change. Arizona’s current property exemptions can be found under Title 33 of the Arizona Revised Statutes.

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