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Many of us hesitate before filing for bankruptcy, concerned that we could lose our possessions. This is a common misconception regarding bankruptcy. In reality, most people who file for bankruptcy never lose any possessions, a situation termed a “no-asset bankruptcy" by those in the know. But how do you know whether you will lose your property in bankruptcy?
In Chapter 7 bankruptcy, the court will liquidate, or sell, your assets in order to repay your creditors what you owe them. However, Arizona state law has provided that certain assets cannot be sold to repay your creditors. This list of assets that are protected under Arizona law is called the list of “exemptions."
If you have property listed below, it cannot be taken from you in bankruptcy in order to repay your creditors. The first category, the homestead exemption, permits debtors to keep their home up to a certain value, but cannot be doubled for spouses who file jointly. However, all personal property can be doubled for joint filers.
Home: up to $150,000 for both husband and wife.
Household Furniture, Appliances, and Furnishings: up to $4,000.
Automobile: Worth up to $5,000, or $10,000 if disabled.
Six Months’ Worth of Food
Clothing: Up to $500 in fair market value.
Musical Instruments: Up to $250 worth.
Pets and Animals: Up to $500.
Engagement and Wedding Rings: Worth up to $1,000.
Library: Up to $250.
Watch: Up to $100.
Prostheses or Wheelchair
Life Insurance Proceeds not to exceed $20,000 if to surviving spouse or child.
The earnings of a minor child, unless debt was for child’s benefit.
Child support or maintenance.
Benefits from employer’s health, accident, or disability insurance program.
Benefits from fire insurance.
Note, however, that some exemptions are limited. For instance, you may only use the homestead exemption to protect your home up to $150,000. After that point, your home is not protected by the statute.
If you have questions about whether your assets are protected, contact an experienced bankruptcy attorney and learn more about your options in bankruptcy.