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What is a bankruptcy exemption?

When it comes to declaring bankruptcy, Arizona residents may be hesitant to do so not just because of the perceived social stigma attached to declaring bankruptcy but also because they are afraid they may lose possession of their most prized assets. However, this is not the case. There is some property that is exempt-this means that the debtor can keep control of this property and does not have to hand it over to the bankruptcy trustee.

Under federal bankruptcy laws, a debtor may exempt some property from bankruptcy. A debtor may also have some property exempted from bankruptcy based on the state's own rules. However, in Arizona, debtors can only apply state law exemptions and not federal. Debtors can claim exemptions on the bankruptcy form titled 'Property claimed as exempt'.

It is important to remember that only debtors who have lived in Arizona for two complete years before filing for bankruptcy can benefit from the exhaustive list of bankruptcy exemptions the state has to offer. If the debtor does not meet this requirement, they may be able to claim exemptions under the Bankruptcy Code.

Up to certain value restrictions, debtors can retain possession not only of their residential home and the land surrounding it, but also household furniture, goods, appliances, musical instruments, engagement and wedding rings, car and even a computer. This list is not exhaustive and those Arizona residents who are unclear of the value of their possessions or of which list their property falls under may want to consider consulting an experienced attorney for more guidance on the matter.

Instead of struggling with their finances, by filing for bankruptcy, Arizona residents can begin planning for the new year with a fresh start and in debt free possession of essential items.

Source: United States Bankruptcy Code, District of Arizona, "Exemptions in Arizona," accessed on Dec. 15