Bankruptcy Exemptions- How They Work
One of the most common questions related to filing a bankruptcy is “can I keep my property?”
The answer is “it depends.” Most states provide exemptions allowing a debtor to keep certain
property, no matter how much debt they owe to creditors, and will not require the debtor to
turn the property over to the bankruptcy estate so long as the debtor is eligible to use the state’s
In Arizona a debtor may use the state’s exemptions only if they have lived in Arizona for at least
2 years prior to the filing of their case. If they have not, the debtor must then look to the state in
which they did reside for the greater part of the preceding two or more years for guidance as that
state’s exemptions or the federal exemptions may apply.
Individuals are not required to surrender their houses or cars in bankruptcy as long as they do
not exceed the equity limits in the exemptions. Exemptions apply to equity in real and personal
property, including but not limited to homes, cars, wedding rings, clothing and household
furnishings. For example, if you own a vehicle and it is worth $12,000 and you owe $9,000 on
the vehicle, you would have $3,000 of equity in the vehicle. In Arizona, the exemption provides
for up to $6,000 equity in a vehicle. The vehicle in this example has only $3,000 in equity
and the debtor would not be required to turn their vehicle over to the bankruptcy estate as it is
Additionally, if a debtor has a secured debt on a home or vehicle and it is below the equity limits
in the exemptions, the debtor may keep those items as long as they continue making payments on
If you are considering bankruptcy please contact our firm to set up a free consultation with an
experienced bankruptcy to determine which alternative is best for you.
Disclaimer: The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship. The information, documents or forms provided herein is intended for general information purposes only and must not be regarded as legal advice. Laws change periodically; therefore the information in this site may not be accurate. It is imperative that you seek legal counsel in order to ascertain your rights and obligations under the applicable law and based upon your specific circumstances.