Arizona Bankruptcy Exemptions 2026: What Property You Can Keep

Worried about losing your home, car, or belongings if you file bankruptcy in Arizona? Understanding state exemptions can ease your fears—most filers keep everything they own.

Arizona's bankruptcy exemption laws protect essential assets from creditors when you file Chapter 7 or Chapter 13. These laws determine what property is "off-limits" to the bankruptcy trustee. For 2026, Arizona maintains generous exemptions that allow most debtors to achieve a "no-asset" bankruptcy—meaning you keep everything while eliminating qualifying debts.

What Are Bankruptcy Exemptions?

Bankruptcy exemptions are laws that protect specific types and amounts of property from being seized and sold to pay creditors. When you file bankruptcy:

• Chapter 7: The trustee can sell non-exempt property to pay creditors—but most filers have no non-exempt assets
• Chapter 13: You keep all property, but must pay creditors the value of non-exempt assets through your repayment plan

Federal vs. State Exemptions

Arizona requires filers to use state exemptions. You cannot choose federal exemptions if you file bankruptcy in Arizona. This is actually beneficial—Arizona's exemptions are among the more protective in the country, especially for home equity.

Arizona Homestead Exemption 2026

The homestead exemption protects equity in your primary residence.

| Exemption Type | Amount Protected | |----------------|------------------| | Single Owner | $250,000 equity | | Married Couple | $250,000 equity (same limit) | | Co-Owned Property | $250,000 per co-owner (potential $500,000 total) |

What Qualifies for the Homestead Exemption?

• Single-family homes (house, condo, townhome)
• Mobile homes (if permanently affixed to land)
• Land (up to 1 acre if inside city/town limits, up to 160 acres if outside)

How Homestead Exemption Works: Examples

Example 1: Equity Below Exemption

• Home value: $350,000
• Mortgage balance: $200,000
• Equity: $150,000
• Result: Fully protected—you keep the home

Example 2: Equity Above Exemption

• Home value: $500,000
• Mortgage balance: $200,000
• Equity: $300,000
• Exemption: $250,000
• Non-exempt equity: $50,000
• Result: Trustee may seek to sell; you'd receive $250,000 from sale

Important: Most Chapter 7 filers with above-exemption equity convert to Chapter 13 to keep their homes.

Arizona Vehicle Exemption 2026

| Vehicle Type | Exemption Amount | |--------------|------------------| | Primary Vehicle | $6,000 equity | | Vehicle for Disabled Person | $12,000 equity | | Secondary Vehicles | Wildcard exemption may apply |

Vehicle Exemption Examples

Example 1: Paid-Off Car

• Car value: $8,000
• Loan balance: $0
• Equity: $8,000
• Exemption: $6,000
• Non-exempt: $2,000
• Options: Pay trustee $2,000 to keep car, or surrender car

Example 2: Financed Car

• Car value: $15,000
• Loan balance: $12,000
• Equity: $3,000
• Result: Fully protected—you keep the car

Example 3: Recent Purchase

• Car value: $25,000
• Loan balance: $22,000
• Equity: $3,000
• Result: Fully protected, but reaffirmation agreement may be required

Reaffirmation Agreements

If you're still paying on your car, you may need to sign a reaffirmation agreement—continuing personal liability for the loan after bankruptcy. This keeps the car but also keeps the debt obligation.

Personal Property Exemptions in Arizona

Household Goods & Furnishings

• Amount: Unlimited for "ordinary and necessary" items
• Scope: Furniture, appliances, clothing, personal effects
• Limit: Does not include luxury items or collectibles of significant value

Tools of the Trade

• Amount: $5,000 per person ($10,000 for married couple filing jointly)
• Scope: Tools, equipment, inventory, books needed for profession
• Examples: Contractor tools, professional equipment, trade-specific machinery

Wedding & Engagement Rings

• Amount: $2,000 combined value
• Scope: Wedding bands and engagement rings only
• Note: Other jewelry falls under general personal property limits

Musical Instruments

• Amount: $400 per item
• Scope: One instrument per family member who plays

Firearms

• Amount: $500 per item (up to 2 firearms)
• Total: $1,000 maximum

Books & Library

• Amount: $250 total
• Scope: Personal library, textbooks, reference materials

Domestic Animals

• Amount: $500 total
• Scope: Household pets, small livestock
• Note: Commercial livestock has different treatment

Wildcard Exemption (Cash & Miscellaneous)

Arizona's wildcard exemption provides flexible protection for any property:

| Filing Status | Wildcard Amount | |---------------|-----------------| | Single | $750 | | Married (joint) | $1,500 |

What the Wildcard Covers

• Cash in bank accounts
• Tax refunds (portion not protected by other exemptions)
• Excess vehicle equity
• Investments
• Secondary vehicles
• Any property not covered by specific exemptions

Retirement Account Exemptions

Most retirement accounts are fully protected in Arizona bankruptcy:

Fully Exempt (Unlimited Protection)

• 401(k) plans
• 403(b) plans
• Traditional IRAs
• Roth IRAs (up to $1,512,350 total across all IRAs—federal limit)
• Pension plans
• Profit-sharing plans
• Defined benefit plans

Important Caveats

Recent Contributions: Large contributions made shortly before filing may be challenged as fraudulent transfers.

Inherited IRAs: May have different treatment—consult an attorney.

Loans from Retirement Accounts: The loan balance becomes a debt you must continue paying or face tax consequences.

Life Insurance & Annuity Exemptions

| Type | Exemption | |------|-----------| | Life Insurance Proceeds | Unlimited if policy prohibits assignment | | Group Life Insurance | $20,000 cash surrender value | | Annuity Benefits | Reasonable support payments protected | | Fraternal Society Benefits | Unlimited |

Public Benefits (Fully Protected)

Arizona bankruptcy exemptions protect these benefits completely:

• Social Security benefits
• Unemployment compensation
• Workers' compensation
• Veterans' benefits
• Public assistance (TANF, SNAP)
• Crime victims' compensation
• Earned income tax credit (EITC)

Important: These benefits are protected even if already deposited in your bank account—but keep them separate from other funds to avoid confusion.

Wage Exemption in Arizona

• Amount: 75% of disposable earnings OR 30× federal minimum wage (whichever is greater)
• Scope: Wages earned before filing but not yet received
• Time Limit: Protects wages for 60 days after filing

What This Means: Most filers' paychecks are protected, making it easier to maintain living expenses during and after bankruptcy.

Property Owned with Spouse (Tenancy by Entirety)

Arizona recognizes tenancy by entirety for married couples, which provides additional protection for jointly owned property:

• Protection: Creditors of one spouse cannot seize property held in entirety
• Scope: Applies to real estate and some personal property
• Bankruptcy Impact: May provide additional protection in Chapter 7

Non-Exempt Property: What You Might Lose

Some property typically falls outside Arizona exemptions:

Likely Non-Exempt Assets

• Vacation homes (not primary residence)
• Rental properties
• Boats & recreational vehicles
• Valuable collections (art, antiques, coins, stamps)
• Stock portfolios (outside retirement accounts)
• Business interests (outside tools of trade exemption)
• Cash exceeding wildcard amounts
• Luxury vehicles with significant equity

Strategies for Non-Exempt Assets

Before Filing:

• Use excess cash to pay down mortgage or car loan (increases exempt equity)
• Purchase exempt assets (necessary household items, tools of trade)
• Convert non-exempt property to exempt (carefully—avoid fraudulent transfers)

During Bankruptcy:

• Negotiate payment to trustee to keep property
• Convert Chapter 7 to Chapter 13
• Accept surrender in exchange for debt discharge

Chapter 13 vs. Chapter 7: Exemption Impact

| Factor | Chapter 7 | Chapter 13 | |--------|-----------|------------| | Keep Property | Yes, if exempt or no equity | Yes, always | | Non-Exempt Assets | May be sold by trustee | Must pay equivalent value to creditors | | Home Equity | Protected up to $250K | Protected, but excess equity affects plan payments | | Vehicle Equity | Protected up to $6K | Protected, but excess affects payments |

When Chapter 13 Makes Sense

• Significant non-exempt equity in home or other assets
• Behind on mortgage but want to keep house
• High income disqualifies Chapter 7
• Non-exempt assets you want to keep

Frequently Asked Questions About Arizona Exemptions

Can I choose federal exemptions instead?

No. Arizona opted out of federal exemptions. All filers must use Arizona state exemptions.

What if I moved to Arizona recently?

You must have lived in Arizona for 730 days (2 years) before filing to use Arizona exemptions. Otherwise, you'll use exemptions from your previous state.

Do exemptions apply to my spouse's debts?

Community property rules apply in Arizona. Generally, debts incurred during marriage are community debts, and all community property is available to creditors—but your separate property is protected from spouse's separate debts.

Can exemptions change during my case?

Exemption amounts are locked in at filing date. Changes to exemption laws after you file don't affect your case.

What about tax refunds?

Tax refunds are tricky—portion attributable to pre-filing earnings may be non-exempt. Wildcard exemption often used to protect refunds.

Are 529 college savings plans protected?

Arizona protects 529 plans for beneficiary's education, but contributions made within 2 years of filing may be recoverable by trustee.

Preparing for Your Bankruptcy Filing

Asset Inventory Checklist

Before meeting with an attorney, gather:

• [ ] Home: Current value (Zillow estimate, appraisal, or tax assessment) and mortgage balance
• [ ] Vehicles: KBB or NADA values for all vehicles, loan payoff amounts
• [ ] Bank Accounts: Current balances in all accounts
• [ ] Retirement: 401(k), IRA, pension statements showing current values
• [ ] Personal Property: Major items worth over $500 (jewelry, electronics, collections)
• [ ] Business Assets: Equipment, inventory, accounts receivable
• [ ] Insurance Policies: Life insurance cash surrender values

Maximizing Your Exemptions

Timing Considerations:

• File when exempt assets are maximized
• Avoid large non-exempt cash balances
• Ensure retirement contributions are within normal patterns

Documentation:

• Keep receipts for major purchases
• Maintain records of asset values
• Document separate vs. community property

Key Takeaways

1. Arizona's $250,000 homestead exemption is among the most protective in the country
2. Most filers keep all their property—exemptions cover typical household assets
3. Retirement accounts are fully protected in almost all cases
4. Chapter 13 allows you to keep non-exempt assets by paying their value over time
5. Recent Arizona residency (2+ years) is required to use state exemptions
6. An attorney can help maximize exemptions and choose the right bankruptcy chapter

2026 Exemption Amounts at a Glance

| Asset Category | Exemption Amount | |----------------|------------------| | Homestead (home equity) | $250,000 | | Vehicle | $6,000 ($12,000 if disabled) | | Household goods | Unlimited (ordinary items) | | Tools of trade | $5,000 ($10,000 married) | | Wedding rings | $2,000 | | Wildcard (any property) | $750 ($1,500 married) | | Firearms | $500 each (max 2) | | Books | $250 | | Animals | $500 | | Musical instruments | $400 each | | Retirement accounts | Unlimited (mostly) | | Public benefits | Unlimited |

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Last Updated: February 14, 2026
Disclaimer: Exemption laws change periodically. This guide reflects Arizona statutes as of 2026. Always consult with a licensed Arizona bankruptcy attorney for advice specific to your situation.