How Bankruptcy Exemptions Work in Phoenix
Chapter 7 bankruptcy exemptions tell you what property you get to keep when you file for bankruptcy in Phoenix. Bankruptcy exemptions apply to your home, car, and other property. You get to keep all property that is exempt, but the trustee may take and sell non-exempt property to pay your unsecured creditors. Exemptions in Chapter 13 bankruptcy work a little differently. In Chapter 13 Bankruptcy, your property is never at risk. You can find more information on bankruptcy exemptions on our website.
Bankruptcy Exemption Systems
Each state has a set of exemptions that apply in bankruptcy. Some states allow filers to choose from either state or federal exemptions depending on what is best for them, but Arizona is not one of those states. For a complete list of bankruptcy exemptions in Phoenix, Arizona, click here.
How Bankruptcy Exemptions Work
If your property is worth less than the amount of the allowed exemption, cha-ching, you get to keep the property. If your property exceeds the allowed exemption amount, the bankruptcy trustee may take the property and sell it to pay your creditors. However, things are a little more complicated than that which is why you want to speak to Phoenix bankruptcy attorney.
Three Reasons Why Most People Keep Their Property
First, the value of your property is based on its fair market value, not what you paid for it. You might have purchased a car for $20,000 but if its current fair market value is only $5,000, that is the amount you use for bankruptcy exemptions in Phoenix.
Second, only the amount of equity in the property matters. So, if you bought the car for $20,000 and its current fair market value is $5,000 but you owe $10,000, you have no equity and, therefore, you would no value to exempt. Now in this example, you would have other problems and challenges if you wanted to keep the car, but that is why you retain a Phoenix bankruptcy attorney to help you out.
Third, the trustee will incur costs to take the property from you and sell it. Sometimes, even if the trustee could take the property, it doesn’t make sense for them to do it.
So, most people keep everything they want to keep after filing bankruptcy in Phoenix.
Special Rules for the Homestead Exemption
In Arizona bankruptcy, you may qualify for the homestead exemption. There are limits imposed if you have resided in the property for 40 months or less and there are special issues if you are trying to claim a homestead exemption on property in another state. You should consult with a Phoenix bankruptcy attorney regarding the special rules and limitations of the Arizona homestead exemption. You can also find more information on the Arizona homestead exemption on our website.
Contact Phoenix Fresh Start Bankruptcy
If you are facing financial troubles, it’s time to act and explore bankruptcy as an option. Don’t make the same mistake many others have by trying to file for bankruptcy in Phoenix without the assistance of a bankruptcy attorney. If you do not understand how exemptions work, you could lose the property you love. We have payment plans for every situation. Contact us for a free financial evaluation.