A common question asked by consumers looking to file for bankruptcy is “Will I lose all of my property if I file for bankruptcy?” The simple answer is: probably not – but it depends on several factors, including what type of property you have, the value of the property and which set of exemptions you are required to use.
The United States Bankruptcy Code provides a bankruptcy debtor with certain exemptions that will allow the debtor to keep most of his/her property up to a certain value. There are federal exemptions and state exemptions that may be used, depending on where the debtor’s domicile has been for the previous two years. A knowledgeable bankruptcy attorney at Platt & Westby, P.C. will be able to help you determine which set of bankruptcy exemptions will apply to your situation and which property may or may not be protected based on those exemptions. For many people, this determination is the make-or-break decision in whether they should even file a bankruptcy petition.
In Arizona, for instance, an individual who uses the Arizona state exemptions will be able to keep a home that (s)he lives in if the equity in the home is less than $150,000, as well as one vehicle with less than $6,000 in equity, and most household goods and furnishings, including consumer electronics. Additionally, most retirement accounts fall under the exemptions, with no limitation on amount, but there are some limitations on monies in other financial accounts upon the filing of the bankruptcy petition. In Arizona, the current state exemption only allows a bankruptcy debtor to have $300 or less in one bank account on the day of filing. For many people, this limitation sounds impossible, but what it really comes down to is the timing of your actual petition file date. Any amounts over the exemption limits that are provided may be required to be turned over to the bankruptcy trustee to be liquidated for the benefit of your creditors.
Unfortunately, there are some items that just won’t fit into any category of exemptions depending on your state of filing and the exemptions you are required to use. In Arizona, these items might be a jet ski, jewelry that is not wedding or engagement rings, a trailer, more than one firearm or more than one vehicle, or an interest in a business. If you have property that is non-exempt, there are still some options for keeping your property, such as filing a Chapter 13 bankruptcy and ensuring that your creditors are paid the amount they would have been paid if the property was turned over to the bankruptcy estate in a Chapter 7 bankruptcy. There are other options available to keep certain property as well, however, it can get complicated quickly, so it is important to discuss your options with a professional before making a mistake that cannot be undone.