What Are Bankruptcy Exemptions?

Exemptions are state laws that protect specific property from being taken during bankruptcy. Arizona has its own set of exemptions — you cannot use federal exemptions in Arizona.

Disclaimer: This information is for educational purposes only. Exemption amounts and laws change. Consult a licensed Arizona bankruptcy attorney for current, case-specific advice.

Arizona Exemption Highlights

Home (Homestead Exemption)

• Amount: Up to $250,000 in equity
• Requirement: Must be your primary residence
• Note: This is one of the more generous homestead exemptions in the country

Vehicles

• Amount: $6,000 per debtor (each spouse)
• Applies to: Any motor vehicle
• Joint filing: A married couple can protect up to $12,000 in vehicle equity

Personal Property

Arizona allows broad categories of personal property protection:

• Household goods: $6,000 total
• Clothing: No specific limit (reasonable amount)
• Food and fuel: 6 months supply
• Books: $250
• One watch, one typewriter, one bicycle, one sewing machine, one gun: $2,000 each

Retirement Accounts

• 401(k), 403(b), IRA: Fully protected (no limit)
• Pension benefits: Fully protected
• This is one of Arizona's strongest protections

Tools of Trade

• Amount: $5,000
• Includes: Equipment, instruments, and tools necessary for your profession

Wages

• Minimum wage earners: Fully protected
• Others: 75% of disposable earnings protected
• Bank account deposits: Protected for 2 pay periods after deposit

Insurance

• Life insurance proceeds: $20,000
• Health insurance: Protected
• Disability benefits: Protected

How Exemptions Work in Practice

Chapter 7

In Chapter 7, exemptions determine what property you keep. If you have property with value above the exemption amount, the bankruptcy trustee can sell it to pay creditors. In practice, most Chapter 7 cases in Arizona are "no-asset" — meaning all property is fully exempt.

Chapter 13

In Chapter 13, exemptions determine the minimum amount you must pay into your repayment plan. Your plan must pay unsecured creditors at least as much as they would receive in a Chapter 7 liquidation.

Common Questions

Can I keep my house? If your equity is under $250,000, yes. If it's over, you may need to consider Chapter 13 instead.

What about my car? Under $6,000 in equity is protected. Still making payments? The loan balance reduces your equity, so many financed cars are fully protected.

Will I lose my retirement savings? No. Retirement accounts are fully protected in Arizona with no dollar limit.

Get a Free Assessment

Every situation is unique. Take our free assessment quiz to get an initial evaluation of your options, or connect with a licensed Arizona bankruptcy attorney for a consultation.