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Bankruptcy Exemptions

The Bankruptcy Code lets you keep certain "exempt" property. These exemptions may apply to assets such as your home, vehicle, household goods and furnishings and retirement accounts. The value of property that can be claimed as exempt varies from state to state.

For example, in Arizona, you (or you and your spouse) can exempt up to $150,000 in equity in your home. This is known as a "homestead exemption." You may also exempt up to $6,000 in the fair market value (FMV) in one vehicle; $6,000 in the FMV of household furniture and appliances; up to $500 FMV in clothing; and up to $2,000 FMV in engagement and wedding rings. Except for the $150,000 homestead exemption, these exemptions are doubled if you are married.

Most retirement accounts are exempt from bankruptcy in Arizona, including Individual Retirement Accounts (IRAs), ERISA qualified benefits, and pensions. Life insurance policies are also generally exempt.

Other exempt assets generally include child support and alimony that are necessary for the debtor’s support.

 
 

Yuma Bankruptcy: An Overview

Our Yuma bankruptcy attorneys help individuals and businesses file for bankruptcy protection and eliminate dischargeable debts.

In Arizona and all other states, both individuals and businesses can file for bankruptcy protection and have their debts discharged or modified.

Bankruptcy can be filed under Chapters 7, 11, 12, and 13 of the U.S. Bankruptcy Code. For individuals and couples, the most common forms of bankruptcy are Chapter 7 (a liquidation) and Chapter 13 (personal reorganization). Chapter 11 is commonly used to reorganize businesses but is a powerful tool to help individuals reorganize as well. Chapter 12 is a reorganization exclusively for family farmers. While many attorneys specialize in either Chapter 7 and Chapter 13 (often referred to as consumer bankruptcy attorneys) or Chapter 11 and Chapter 12, our attorneys have significant experience helping individuals, businesses and creditors in all Chapters of bankruptcy.

One of the primary purposes of bankruptcy is to discharge certain debts to give an individual debtor a "fresh start." When the bankruptcy is finalized, you (the debtor) are no longer responsible for certain debts. While most debts are dischargeable, certain specific types of debts are not. Common types of non-dischargeable debts include child support and student loans. Recent tax debts are usually non-dischargeable but some types of tax debts may be dischargeable. Our attorneys have represented debtors with all types of debts and are able to plan the most effective bankruptcy for the client, maximizing the discharge and/or working out a plan to repay the non-dischargeable debts, while stopping penalties and interest from accruing. Schedule a consultation in our Yuma office to see how we can help you.

HOW BANKRUPTCY WORKS

A bankruptcy case begins with the filing of a petition with the Bankruptcy Court. In addition to the petition, you must file schedules listing your assets, debts, income and expenses. The purpose of the schedules is to show the Court, the Trustee, and creditors what has been going on in your economic life prior to filing for bankruptcy. Between 20 and 40 days after the petition is filed, a meeting of creditors is held. An individual must attend the meeting and answer questions regarding financial affairs and property. In a business case, the principal of the business debtor attends the meeting and answers questions about the business’ assets and liabilities.

Protection. Filing a bankruptcy petition stops collection actions against you and your property through the "automatic stay." As long as the automatic stay is in effect, creditors are prohibited from calling, suing, or garnishing your wages. Even creditors with non-dischargeable debts will be prohibited, at least temporarily, from attempting to collect the debt. Our office works with you to make sure all your creditors are listed on the bankruptcy schedules and to stop the collection calls, garnishments and lawsuits.

Credit Reports. A bankruptcy can be reported on your credit report for up to ten years from the date of filing the petition. Initially, the bankruptcy can negatively affect your credit score and your ability to obtain new credit. However in many cases, an individual’s credit score can improve quickly once a discharge is entered. At your initial consultation the bankruptcy attorney can discuss the impact of bankruptcy on your credit and what options you will have to rebuild credit in the future.

CHAPTER 7 IS THE MOST COMMON FORM OF BANKRUPTCY

A Chapter 7 is called a "liquidation" which means that the bankruptcy trustee gathers and sells all the non-exempt assets and uses the proceeds to pay creditors. An individual is allowed to keep certain "exempt" property. Exempt property usually includes your home, vehicle, household goods and furnishings, social security and retirement accounts. Even though a debtor may keep exempt assets, liens on those assets don’t usually go away with the bankruptcy. Our experienced bankruptcy attorneys can assist you in evaluating your exempt and non-exempt assets.

Eligibility for Chapter 7. An individual wanting to file a Chapter 7 case must be eligible for Chapter 7. An individual is eligible if their debts are not primarily consumer debts or if they meet certain income requirements. Our bankruptcy attorneys will do a thorough analysis of your debts and expenses to assist you in selecting the bankruptcy chapter that will provide you with the most benefit. A business that files for a Chapter 7 is turned over to the trustee who usually dissolves the company and sells the assets for the benefit of creditors.

CHAPTER 13: A BETTER CHOICE FOR MANY DEBTORS

Under Chapter 13, you (the debtor) propose a plan to pay your creditors over a three- to five-year period. You are not required to pay unsecured creditors in full and, upon completion of your Plan, unpaid balances are usually discharged.

Eligibility. Any individual, even if self-employed or operating an unincorporated business, is eligible for Chapter 13 relief as long as their debts fall under certain permitted limits that are periodically adjusted. A corporation or partnership may not be a Chapter 13 debtor.

Advantages. In some cases, Chapter 13 offers advantages over a Chapter 7 liquidation. Perhaps most significantly, if you are behind on your mortgage payments, Chapter 13 allows you to stop the foreclosure and make up the missed payments over three to five years. Depending on the value of your home, a Chapter 13 may allow you to strip off a second mortgage on your residence. In some situations, individuals can also rewrite their vehicle loans to pay the fair market value at a reasonable rate of interest over the life of the plan. Chapter 13 also allows individuals to lower a higher rate of interest on a vehicle loan to a reasonable interest rate. If you are employed and have a home or car with a loan, our attorneys will help you evaluate if Chapter 13 is a viable option to help you pay off your secured debts and discharge unsecured debts.

CHAPTER 11 FOR INDIVIDUALS

Both individuals and businesses can file a Chapter 11 bankruptcy. Individual Chapter 11 are usually ideal for an individual with more assets and higher debts. The cost of a Chapter 11 is higher than a Chapter 7 or Chapter 13, however often the benefits make the additional cost a worthwhile investment. Our attorneys have extensive experience in individual and business Chapter 11 cases and can help you analyze the best strategy for your reorganization.

CHAPTER 12

Chapter 12 allows "family farmers" and "family fisherman" to restructure their finances and avoid liquidation or foreclosure. It is similar to a Chapter 13 bankruptcy, but provides additional benefits to this special class of debtors. Our bankruptcy attorneys have significant experience in Chapter 12 and can thoroughly analyze if you qualify for and will benefit from a Chapter 12 bankruptcy.

BUSINESS BANKRUPTCIES

A business can file for protection under either Chapter 7 or Chapter 11. As discussed above, Chapter 7 is a liquidation where the trustee takes over the business and the pre-bankruptcy owners relinquish control over the business. In a Chapter 11, the business owner remains in control of the business, subject to the oversight and jurisdiction of the court. Chapter 11 business reorganization allows a business to restructure its assets and liabilities so that it may pay off some of its debts and continue to operate. After a Chapter 11, a reorganized business has the opportunity to rebuild its operations.