If you’re considering bankruptcy in Arizona, you’re probably wondering:
“Will I lose my house, my car, or everything I own?”
The good news is that Arizona law provides meaningful protections for many essential assets. But Arizona requires you to use its state exemption system — and understanding how it works is critical before filing.
Here’s what you need to know.
Arizona Requires Use of State Exemptions
If you have lived in Arizona for at least 730 days (2 years) before filing bankruptcy, you must use Arizona state exemptions. You generally cannot choose the federal exemption system.
Because you don’t have a federal option, proper planning is especially important.
Arizona Homestead Exemption
Arizona provides a strong homestead exemption.
🏠 Homestead Protection
Arizona protects up to $400,000 of equity in your primary residence.
This applies to:
- Single-family homes
- Condominiums
- Mobile homes
- Certain cooperative housing
Example:
- Home value: $650,000
- Mortgage balance: $300,000
- Equity: $350,000
Your $350,000 equity would be fully protected under Arizona’s homestead exemption.
If your equity exceeds the exemption amount, additional planning may be necessary.
Arizona Motor Vehicle Exemption
Arizona protects equity in one vehicle per filer.
- Up to $15,000 in vehicle equity
- Up to $25,000 if the debtor is physically disabled
If you owe money on the car, exemptions protect only your equity — not the total value.
Example:
- Car value: $28,000
- Loan balance: $20,000
- Equity: $8,000
The $8,000 equity would be protected under the vehicle exemption.
Arizona Personal Property Exemptions
Arizona law protects many everyday items necessary for living and working.
These include protections for:
- Household furniture and appliances
- Clothing
- Engagement and wedding rings (up to a set limit)
- Pets
- Musical instruments (up to a limit)
- Books and electronic devices
- Tools of the trade (up to a specific limit)
Unlike some states, Arizona does not provide one large general “wildcard” exemption, so asset-specific planning matters.
Bank Accounts and Wages
Arizona provides protection for:
- Certain amounts of wages
- Certain public benefits
- Some retirement funds
However, large cash balances may not be fully protected. Timing and pre-filing strategy can be important.
Retirement Accounts
Most tax-qualified retirement accounts are protected under federal law, including:
- 401(k)s
- IRAs (subject to federal caps)
- Pensions
- Profit-sharing plans
Retirement savings are typically safe in bankruptcy.
How Exemptions Work in Chapter 7
In Chapter 7 bankruptcy:
- A trustee may sell non-exempt property.
- Exempt property is protected.
- Many Arizona cases are “no-asset” cases where nothing is taken.
However, if you have significant non-exempt assets (such as excess home equity, investment property, or high cash balances), additional planning is required.
How Exemptions Work in Chapter 13
In Chapter 13:
- You keep your property.
- You enter a 3–5 year repayment plan.
- The value of non-exempt property affects how much you must repay unsecured creditors.
Even if your property is protected, exemptions still influence your repayment calculation.
Important Rules to Know
1. Residency Requirement
You must have lived in Arizona for at least 730 days before filing to use Arizona exemptions. If you recently moved, special federal look-back rules apply.
2. Exemptions Protect Equity — Not Full Value
Exemptions protect your equity in property.
Example:
- Boat value: $20,000
- Loan balance: $15,000
- Equity: $5,000
Only the $5,000 equity must fit within available exemptions.
3. Do Not Transfer Property Before Filing
Transferring assets to friends or family before filing can result in serious legal consequences, including denial of discharge.
Is Bankruptcy Right for You?
Bankruptcy can:
- Stop foreclosure
- Stop wage garnishment
- Stop repossession
- Eliminate credit card debt
- Eliminate medical debt
- Provide a fresh financial start
But Arizona’s exemption system requires careful analysis before filing.
Speak With an Experienced Bankruptcy Attorney
Arizona exemption law is specific and technical. The right strategy depends on:
- Your home equity
- Your vehicle equity
- Your bank account balances
- Your business interests
- Your long-term financial goals
Before filing, make sure you understand exactly what is protected — and what is not.
If you’re overwhelmed by debt in Arizona, schedule a consultation to review your options and protect what matters most.
