Many work hard building a comfortable life savings while living within their means to suddenly face unanticipated events that shake the financial foundation upon which they have built their life. Families may spend a lifetime acquiring their possessions. Sometimes sudden unexpected events including an economic downturn, unanticipated job loss, serious health issue or other adverse event can overwhelm and financially devastate a family. You may hesitate to seek bankruptcy protection because you believe that you will not be able to keep your stuff. However, a substantial number of our clients keep most if not all of their possessions when they seek bankruptcy relief.
There are two principal types of consumer bankruptcy – Chapter 7 and Chapter 13. A Chapter 13 bankruptcy involves making payments to a repayment plan over a 3- or 5-year period and receiving a discharge of remaining unsecured balances at the end of the payment plan. You generally keep all your assets in a Chapter 13 filing as long as your unsecured creditors are “taken cared of”. Our Bankruptcy Attorney will review the “best interest of creditors” test with you to determine if keeping all your assets and “taking care” of your creditors is financially feasible. Our Chapter 13 Bankruptcy Trustees are rarely, if ever, interested in seizing and liquidating any personal assets.
A Chapter 7 bankruptcy, also known as “liquidation bankruptcy”, is more commonly what people think of as a bankruptcy where they surrender their possessions. Note that only “non-exempt” assets are surrendered–the assets not protected by statute. The appointed Chapter 7 Trustee will request for turnover of the unexempt asset. Then they will liquidate the asset and disburse the funds, if there is any, to the unsecured creditors.
The only assets that are subject to liquidation and distribution are “non-exempt” assets. These are the “extra” assets that are not protected by statute. There are State or Federal exemptions applied to each bankruptcy case. The exemptions are the specific statute protecting your basic needs up to a specific value. Examples include a car, cash in the bank account, household goods, retirements, and clothing. If you have lived in Arizona for two years or greater prior to your bankruptcy, Arizona exemption statutes will apply to your case. If you have resided for less, our Arizona Bankruptcy Attorney will determine which set of statutes will apply. It may be the Federal statutes or your prior State’s statute.
Your assets are valued at the “hard liquidation amount”,-the amount you would receive if you were to quickly sell the asset in its current condition. For larger items, like your car or home, the state and federal statute protects the equity. The equity is the market price minus the loan balance.
See the examples below:
Car
$25,000.00 Market Value
-$22,000.00 Loan Balance
$8,000.00 is the equity.
Home
$650,000.00 Market Value
-$520,000.00 Mortgage Balance
$130,000.00 is the equity
If you are married, Arizona allows protection up to the statutory amount for each person. This applies even if your spouse does not file. This ultimately means the exemption amount can double. The only exception is the Homestead protection.
Some of the most utilized Arizona exemptions include the following:
Keeping Your Home: The homestead exemption protects the equity in your primary residence up to $414,700.00 if you purchased the home more than 3 years and 4 months prior to filing bankruptcy. This applies to single family homes, condominiums, mobile homes, and manufactured homes. This DOES NOT include motor homes, recreation vehicles, or campers.
You can calculate your equity by following this example below:
Home
$650,000.00 Market Value (Check www.zillow.com)
-$520,000.00 Mortgage Balance
$130,000.00 is the equity
The Family Vehicle: A motor vehicle is protected up to $15,000 in equity for one vehicle if you are single. If you are married, the equity in a second vehicle can be protected up to $15,000.00, or a total of $30,000.00 can be protected for one vehicle.
All Household Furnishings: Your household furnishings including furniture, pictures, televisions, and other household items is protected up to $15,600.00. This is not the purchase price of the item but more akin to garage sale value. Most people do not come near this amount.
Retirement Plans: Many types of retirement plans are protected at 100%. This includes defined benefit plans, tax exempt retirement accounts, 401K accounts, SIMPLE IRA accounts, IRAs and Roth IRAs up to a certain monetary limit, certain public employee retirement accounts, ERISA plans and other retirement or deferred compensation accounts. Because these can be substantial assets, it is important to consult with an experienced Arizona bankruptcy attorney to determine if your plan is exempt from bankruptcy.
Money in the Bank: Up to $5,200.00 in a single bank account is protected at the time the bankruptcy case is filed. Since bank account balances are revolving, the value of the account is determined on the day the case is filed. Note, this is for one account and cannot be spread between multiple accounts. If you are married, the statute protects up to two accounts at $5,200.00 each or the combined amount of $10,400.00 for one account.
Tools of the Trade: The aggregate of equipment and tools used in an occupation up to a value of $5,000.00, and $10,000 if married, is protected..
Funds from Public Benefit Programs: Your public benefits, such as social security,VA Disability, adoption subsidies,, are 100% protected. It is recommended for these funds to be deposited into an isolated account with no other incoming deposits. An account with only social security money deposits may be protected independently from the Arizona bank account exemption. .
While this is only a partial list, it provides some idea of the scope, variety and value of items that may be exempt from bankruptcy proceedings. An experienced Arizona bankruptcy attorney can help you maximize your use of the bankruptcy exemptions system so that you keep your stuff. While you cannot simply give items away or engage in sham sales, there are valid ways to convert non-exempt assets to exempt assets subject to bankruptcy protection.
Our Arizona bankruptcy lawyers are committed to helping debtors protect their assets and keep their stuff when filing bankruptcy. We believe that the bankruptcy process is more than simply filing for bankruptcy protection; it is about effective asset management and asset protection. Stone Rose Law offers customized bankruptcy solutions tailored to your individual needs and designed to help you protect your assets and keep your property so contact us today at 480-428-2697 today.
