Most chapter 7 bankruptcy cases filed in the U.S. are considered “no asset” cases. “No asset”, is a term lawyer and others involved in the bankruptcy process call chapter 7 cases in which there are no assets available for the chapter 7 trustee to sell and share with creditors either because they are legally “exempt” or just not worth the time.
So a basic question: What does the law protect?
A good place to start is to read a basic list of Arizona bankruptcy exemptions. The U.S. Bankruptcy Court updates a list every so often and has done so as recently as May 2010. Read it here.
Some interesting points about this list:
1. Most major assets Arizona consumers own are exempt in a chapter 7 bankruptcy case.
– Homes – possibly 150000 in equity is exempt (equity =value minus the bank loan)
– Cars – 5000 in equity per person – Most retirement plan/accounts
2. “Assets” arguably include some things you wouldn’t normally think of like:
– assets transferred to family or friends within a certain period of time prior to filing – money paid to creditors within a certain period of time prior to filing – claims that may exist at the time of filing the case but are unknown – claims against creditors, personal injury claims – tax refunds owed to the debtor
3. Some assets that aren’t exempt can be liquidated and “spent” in certain ways to benefit the debtor prior to filing the chapter 7 bankruptcy. (Tread Carefully)
4. In a chapter 13 bankruptcy, you can voluntarily surrender non-exempt assets or protect the value of non-exempt assets by paying the value to unsecured creditors during the plan.
5. Arizona is an “opt-out” state. This means that it has chosen not to use federal bankruptcy exemptions. Arizonans can only use state exemptions and federal non-bankruptcy statutes that may protect certain assets.
6. Arizona bankruptcy filers can only claim the Arizona exemptions if they were domiciled (lived) in Arizona for two years before filing. If they weren’t, they must use the exemptions provided by the state where they were domiciled the longest during a period between 2 and 2.5 years prior to the filing date. Confusing…I know, and it gets more confusing if the state the law forces the debtor to use, doesn’t allow non-residents to use their exemptions, or if the exemption scheme is complex.