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Filing a Bankruptcy in Arizona? Know Which of Your Assets Are Protected
Even if you are faced with a bankruptcy, it may be comforting to know that some of your assets may be protected by bankruptcy "exemption" laws. If some of your assets fall into these exempted categories, then you as the debtor will be allowed to keep these assets after filing for bankruptcy. The asset, however, can only be protected if the court determines that the asset is within the allowable values as per state regulation. Some states follow the federal government's list of bankruptcy exemptions. Arizona is a state that has its own exemptions, and the list of exemptions and maximum value limits is much friendlier to debtors in Arizona that in states that follow federal guidelines. Arizona allows more assets with a greater allowable value than many other states.
One of a debtor's most important assets is, of course, the family home. Under the homestead exemption, the home of a single or married debtor is protected providing that the home is the debtor's primary residence. The home can even have as much as $150,000 in equity and still be exempt. However, any equity above this amount is not protected so a debtor might be ordered to pay the amount of excess equity to the court in order to keep the bankruptcy from being dismissed. Your bankruptcy trustee might decide to force a sale of the home. If this happens, the debtor is still entitled to $150,000 in equity. Any remaining moneys will be distributed to the creditors. This exemption may only be used once in a bankruptcy.
Vehicle exemptions also are allowed when filing a bankruptcy. A debtor may keep a vehicle as long as it has less than $5,000 in equity. If debtors are married, they are allowed two, $5,000 exemptions toward two of their vehicles. If there is any vehicle equity beyond the $5,000, this situation is treated in the same way as in the homestead exemption.
Personal property exemptions include items such as appliances, household furniture and furnishings. Married couples can protect up to $8,000 in assets, while single debtors may protect up to $4,000 of assets. These items are assessed at their used value, rather than if they were new items. A detailed list of all of these personal assets must be given to the court.
Bankruptcy laws also protect some miscellaneous assets. Among these items is equipment, such as tools, that can be used for commercial activities. Other items include clothing, wedding jewelry, weapons, books, musical instruments, hobby-related items and certain life insurance earnings. Specific values for each of these items have been set by bankruptcy codes.
For those who worry about retirement, it will be some comfort to note that several retirement-based assets are protected by bankruptcy laws with no value restrictions. However, these must be qualified types of assets, including 401k, state retirement funds, IRAs and other similar assets.
If an asset does not have a present, vested value at the time of filing, then typically it is protected under the bankruptcy code. Such assets include annuities that are not yet vested, future interest in a business as established by the corporate bylaws, and employee stock purchase plans that are not yet vested.
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