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Arizona and Federal Exemptions
One of the schedules of assets and liabilities which will be filed by the individual debtor is a schedule of "exempt" property, Schedule C. Federal bankruptcy law provides that an individual debtor can protect some property from the claims of creditors either because it is exempt under federal bankruptcy law or because it is exempt under the laws of the debtor's home state. 11 U.S.C. § 522(b). Arizona is an "opt-out" state and has taken advantage of a provision in the bankruptcy law that permits each state to adopt its own exemption law, in place of the federal exemptions. Thus, those debtors filing bankruptcy in Arizona are allowed the exemptions as set forth in the Arizona statutes and federal non-bankruptcy statutes. Check the second box on the top of Schedule C, because Arizona law does not allow debtors to claim the exemptions provided by 11 U.S.C. § 522(d).
As of October 17, 2005, Arizona residents may claim the exemptions made available by Arizona law only if they were domiciled in Arizona for all of the two years before the bankruptcy filing. If the debtor was not domiciled in Arizona for all of those two years, then the debtor must claim the exemptions provided by the state where the debtor was domiciled for the greater part of the six months between two years and two and a half years before the bankruptcy filing. 11 U.S.C. § 522(b)(3)(A) (effective for cases filed after October 17, 2005). If the debtor is ineligible to claim exemptions provided by that state's law, then the debtor may claim exemptions provided in Bankruptcy Code § 522(d), which are not listed in this pamphlet. Legal counsel must be consulted if the debtor was not an Arizona resident for all of the two years before filing bankruptcy.
A brief example may help demonstrate how exemptions work. In Arizona, a married couple is permitted to retain 2 vehicles worth up to $10,000.00 total. Picture a situation where Vehicle A is worth $10,000.00 and you still owe the bank $6,000.00; Vehicle B is worth $6,000.00 and is completely paid off. The value that matters is your equity position; even though the cars are worth a combined $16,000, well above the exemption, your equity in Vehicle A is only $4,000 due to the lien. Thus, your equity position is only $10,000 and you will retain both vehicles. It is important when valuing your property to use the right reference. Blue Book value for vehicles is probably appropriate. For personal property, you use the neighbor's garage sale method - if you were to purchase your $1,000 sofa from the neighbor's garage sale, what would you pay? $100.00 - $200.00? While it is important not to overvalue your assets, be careful not to undervalue them either. Undervalued assets appear suspicious to the Trustee and may result in the dismissal of your case.
• Click here for the Asset Exemption Description Statutory Provision (.pdf)
Federal Non-bankruptcy Exemptions
RETIREMENT BENEFITS
- Government employees' retirement payments 5 U.S.C. § 8346(a) Annuities paid to members of the armed services, based on retirement or retainer pay 10 U.S.C. § 1440
- Foreign service employees - Benefits, annuities, or payments to survivors of foreign service employees under the Foreign Service Retirement and Disability System 22 U.S.C. § 4060(c)
- Special pensions awarded to persons on the Army, Navy, Air Force and Coast Guard Medal of Honor roll 38 U.S.C. § 1562(c)
- Payments of benefits due or to become due under any law administered by the Veterans' Administration 38 U.S.C. § 3101
- Retirement annuities paid pursuant to the Railroad Retirement Act of 1974, 45 U.S.C. §§ 231 et seq. 45 U.S.C. § 231m
- Social security benefits 42 U.S.C. § 407
- Central Intelligence Agency retirement benefit payments 50 U.S.C. § 403
- Military survivor annuities paid pursuant to the Survivor Benefits Plan 10 U.S.C. § 1450(i)
- Annuities paid to survivors of a Justice or judge of the United States, a Director of the Administrative Office of the United States Courts, a Director of the Federal Judicial Center, or an administrative assistant to the Chief Justice of the United States. 28 U.S.C. § 376(n)
- Benefits paid to surviving spouses of lighthouse service personnel 33 U.S.C. § 775
- Disability and death benefits paid to federal government employees as a result of work injuries 5 U.S.C. § 8130
- 75% of earned but unpaid wages 15 U.S.C. § 1673
- Death and disability payments paid pursuant to the Longshoremen's and Harbor Workers' Compensation Act 33 U.S.C. § 916
- Seamen's clothing 46 U.S.C. § 1110
- Seamen's wages exempt except from execution other than for the support of a spouse or minor children 46 U.S.C. § 1111(a)
- Compensation paid for injury or death resulting from a war risk hazard under the War Hazards Compensation Act, 42 U.S.C. § 1701 et seq. 42 U.S.C. § 1717
- A United States service member's deposits in a savings institution while the depositor is on permanent duty outside of the United States 10 U.S.C. § 1035(d)
- Payments of benefits due or to become due under Servicemen's Group Life Insurance or Veterans' Group Life Insurance 38 U.S.C. § 770(g)
- Benefits due or to become due under servicemen's group life insurance 38 U.S.C. § 1970(g)
- Veterans' benefits 38 U.S.C. § 5301(a)
- Exempts from offset by federal government agencies an amount not to exceed $9,000 owing to a debtor under the Social Security Act, the Black Lung Benefits Act, or laws administered by the Railroad Retirement Board. 31 U.S.C. § 3716(c)(3)(A)(i)
- The Secretary of Treasury "shall exempt from administrative offset ... payments under means-tested programs when requested by the head of the respective agency," and the Secretary is given discretion to exempt from administrative offset such other payments that are requested for exemption by the "head of a payment certifying agency." 31 U.S.C. § 3716(c)(3)(B)
- Railroad workers' unemployment insurance benefits 45 U.S.C. § 352(e)
- Personal property exempted from levy for collection of federal taxes 26 U.S.C. § 6334
- Property of organizations designated by the President of the United States as being entitled to the privileges, exemptions, and immunities provided by the International Organizations Immunities Act (22 U.S.C. §§ 288, et seq.) 28 U.S.C. §§ 1609-1611
- Credits given to members of the Klamath Indian tribes in Oregon by the Secretary of the Interior 25 U.S.C. §§ 543, 545
- Money accruing from any lease or sale of lands held in trust by the United States for any Indian. 25 U.S.C. § 410
- Homesteads purchased out of the trust or restricted funds of individual Indians from taxation and title to such homesteads shall be held subject to restrictions against alienation or encumbrance except with the approval of the Secretary of the Interior. 25 U.S.C. § 412a