Arizona Consumers filing for bankruptcy are seeking protection from their creditors by discharging most debts. As part of that process, without proper planning, debtors can expect to turn over certain assets to the Chapter 7 bankruptcy trustee.   

Once the trustee received these non-exempt assets, he/she may then liquidate them and distribute the money to the creditors. Obviously, prospective bankruptcy filers need to know which assets they may keep and which assets they must give up. 

This is a much greater issue in Chapter 7 bankruptcy than in Chapter 13 bankruptcy. Chapter 7 bankruptcy trustees can sell off assets or demand that you pay off the non-exempt portion of the assets to them quickly. Chapter 13 trustees will not require you to sell anything.  



Phoenix bankruptcy lawyerWhen a person lives in Arizona for at least the last two years and files bankruptcy, the Arizona exemptions apply. If a debtor has lived in Arizona less than two (2) years before filing bankruptcy, then Arizona exemptions do not apply. This is not necessarily bad news as the Arizona Bankruptcy Exemptions are not particularly generous. If you have lived in Arizona less than two years, please contact our bankruptcy attorneys in order to determine the applicable exemptions. 



Bankruptcy filers who have lived in Arizona for the last two years should consider the following exemptions:


Each debtor may retain one vehicle with equity, provided that it does not have more than $6,000 of equity. A disabled debtor gets a $12,000 exemption instead of $6,000. If you have two (2) vehicle with combined equity of less than $6,000, you cannot spread the $6,000 exemption to multiple vehicles. If you are married, each spouse gets one vehicle so long as each vehicle does not have more than $6,000 of equity. Alternatively, a married couple may “stack” both of their $6,000 vehicle exemptions on one vehicle and exempt the single vehicle if it does not have more than $12,000 of equity. A debtor can get an estimate of the vehicle’s private party value by going to Kelley Blue Book at   



A bankruptcy filer’s primary residence is protected under the homestead exemption, provided that it does not have more than $150,000 of equity. The amount of this exemption increases substantially in 2022. The Arizona homestead exemption applies to detached homes, condominiums, mobile homes, and manufactured homes. Even an RV or trailer home may be exempt if a person uses it as a primary residence. Rental properties and second homes are not exempt under Arizona’s homestead statute. 

For example, if a debtor owns a home worth $325,000 and the debtor still owes the bank $200,000, then the home has $125,000 of equity ($325,000 – $200,000 = $125,000 of equity).  In this scenario, the home has less than $150,000 of equity and is exempt. If the home is worth $325,000 with no loan, then it has more than $150,000 of equity. In Chapter 7 bankruptcy, the trustee will sell the home and give the debtor $175,000 of sale proceeds. The trustee will distribute the remaining proceeds to the creditors. A debtor can get a working estimate of the home’s value by going to However, Zillow is not always accurate, and sometimes an actual appraisal or Comparative Market Analysis(CMA) is necessary, particularly where the Zillow value shows that there might be an equity issue.  



A person’s retirement (401(k), IRA, 403(b) and the like) and pension are usually 100% exempt property. As such, a debtor will not lose their retirement in a Chapter 7. 

Some types of investments are not necessarily exempt retirement accounts. Stock options, certificates of deposits, and most mutual funds are not exempt retirement accounts and are subject to forfeiture. Moreover, money in a 401(k) or IRA is exempt only if it remains in the retirement account. Money withdrawn from exempt retirement funds and then deposit the money in a bank account is not protected. 

Cashing out a 401(k) or IRA before filing bankruptcy to pay off creditors is generally a big mistake. When a debtor does this, taxes and penalties often follow and cannot be discharged in the bankruptcy. Moreover, the debts paid off could have been easily discharged in the bankruptcy 


Tools of the Trade

Tools and equipment primarily used to earn a living are exempt as long as their total value is not greater than $5,000 ($10,000 for married filers).  Again, the value for tools and equipment is determined by how much they would fetch used. 


Household Goods and Furnishings

Most furnishings and household goods are exempt up to $6,000 in the aggregate and double that amount for married filers. This includes furniture, household electronics, appliances, and most things that a debtor would use for household purposes. How do you figure out the value?  Don’t use the purchase price. The applicable standard for assessing value for a given item is estimated sales price. In essence, your four-year-old used washer/dryer’s value is worth what you could sell it now on Craig’s List. 


Money in One Bank Account

Any money in a single bank account of $300 or less is exempt ($600 in one account or $300 in two separate accounts if married). At least in theory, this means that the trustee can make a debtor to turn over funds in excess of the limit. The reality is that if there are a few hundred dollars in funds in excess of this amount and there are no other non-exempt assets, the trustee is unlikely to fully administer a bankruptcy estate in order to recapture a few hundred bucks.  

Note: A debtor anticipating filing can spend excess funds on legitimate expenses prior to filing. Buying groceries for the home, making the utility payments, servicing the car are all great options prior to filing. 



In Arizona, wedding rings are exempt if it is worth less than $2,000 ($4,000 for married filers). No other jewelry is exempt in Arizona. If you own expensive jewelry, it will be forfeited to the trustee in Chapter 7 bankruptcy. Though costume jewelry is worth very little and a trustee is not going to ask you to surrender it. 


Social Security

Social security and social security disability funds are completely exempt under federal law.   



All firearms are exempt up to an aggregate fair market value of $2,000 are exempt ($4,000 for married filers). Firearms can be worth a lot of money; as such, make sure you have an idea of their fair market value. 



Wardrobe value of $500 for single filer and $1000 for married filers is completely exempt. This total may seem low; however, anyone who has ever attempted to sell clothes before will tell you that used clothing has little to no value. In twenty years of practice. I have never seen a trustee ask a single question about wardrobe valuation. 


Musical Instruments

Musical instruments are protected up to of $400 for single filer and $800 for married filers are completely exempt. This can be an issue as some instruments such as electric guitars can have decent resale values. 



Completely protected asset. The trustee cannot take your dog.



One bike is protected up to $2000 in value and $4000 for married filers. 



Exempt up to $250 for a single filer and $250 for married filers. This total may seem low; however, anyone who has ever attempted to sell books before will tell you that a used book store will generally offer nickels on the dollar.