What property can I keep?

In a chapter 7 bankruptcy case, you can keep all property which the law says is "exempt" from the claims of creditors. If you moved to Arizona within the past two years, you may be required to use the exemptions from the state where you lived previously. In Arizona the bankruptcy exemptions include:

  • $150,000 in equity in your home;
  • $5,000 in equity in your car;
  • $4,000 in sepcific furniture and appliances;
  • $2,500 in things you need for your job (tools, books, etc.);
  • Specific amounts for wedding rings, watches, pets, clothing, musical instruments, books, etc.
  • Your right to receive certain benefits such as Social Security, unemployment compensation, veteran’s benefits, public assistance, and pensions—regardless of the amount.

The amounts of the exemptions are doubled when a married couple files together (except for the equity in the home). In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth when your bankruptcy case is filed. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement. You also only need to look at your equity in property. That means you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $200,000 house with a $100,000 mortgage, you have $100,000 in equity. You can fully protect the $200,000 home with Arizona's $150,000 exemption. While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.