Because Arizona is an "opt-out" state, a debtor who files a Chapter 7 or Chapter 13 or Chapter 11 bankruptcy petition in Arizona is limited to the use of the Arizona Homestead Exemption, rather than the Federal Homestead Exemption located at 11 USC 522.
Frankly, that's good news. Because the Federal Homestead Exemption is miserly in the extreme and might permit you to exempt the equity in a doghouse. If it was a small doghouse.
The Arizona Homestead Exemption comes in at $150,000 equity in a house that's your principal residence (or other sorts of homestead). If you happen to own a bare piece of dirt worth $150,000 and you live in an apartment on the day you file a Chapter 7 bankruptcy, tough tomatoes! You won't be able to effectively claim an exemption under the Arizona Homestead Act on the bare dirt, and the bankruptcy trustee in the Chapter 7 case will be a very happy person.
The Arizona Homestead Exemption is located here:
http://www.azleg.state.az.us/FormatDocument.asp?inDoc=/ars/33/01101.htm&Title=33&DocType=ARS
The text of the statute (and it changes over time, so don't rely on my posting here for anything but the beginning of your educational process):
33-1101. Homestead exemptions; persons entitled to hold homesteads
A. Any person the age of eighteen or over, married or single, who resides within the state may hold as a homestead exempt from attachment, execution and forced sale, not exceeding one hundred fifty thousand dollars in value, any one of the following:
1. The person's interest in real property in one compact body upon which exists a dwelling house in which the person resides.
2. The person's interest in one condominium or cooperative in which the person resides.
3. A mobile home in which the person resides.
4. A mobile home in which the person resides plus the land upon which that mobile home is located.
B. Only one homestead exemption may be held by a married couple or a single person under this section. The value as specified in this section refers to the equity of a single person or married couple. If a married couple lived together in a dwelling house, a condominium or cooperative, a mobile home or a mobile home plus land on which the mobile home is located and are then divorced, the total exemption allowed for that residence to either or both persons shall not exceed one hundred fifty thousand dollars in value.
C. The homestead exemption, not exceeding the value provided for in subsection A, automatically attaches to the person's interest in identifiable cash proceeds from the voluntary or involuntary sale of the property. The homestead exemption in identifiable cash proceeds continues for eighteen months after the date of the sale of the property or until the person establishes a new homestead with the proceeds, whichever period is shorter. Only one homestead exemption at a time may be held by a person under this section.
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Sound good? Well, it would, except that it's not as simple as it seems.
And that's because there's a bankruptcy cap on homesteads that may be applicable, and that's located here:
11 usc 522 (p)
(p)
Frankly, that's good news. Because the Federal Homestead Exemption is miserly in the extreme and might permit you to exempt the equity in a doghouse. If it was a small doghouse.
The Arizona Homestead Exemption comes in at $150,000 equity in a house that's your principal residence (or other sorts of homestead). If you happen to own a bare piece of dirt worth $150,000 and you live in an apartment on the day you file a Chapter 7 bankruptcy, tough tomatoes! You won't be able to effectively claim an exemption under the Arizona Homestead Act on the bare dirt, and the bankruptcy trustee in the Chapter 7 case will be a very happy person.
The Arizona Homestead Exemption is located here:
http://www.azleg.state.az.us/FormatDocument.asp?inDoc=/ars/33/01101.htm&Title=33&DocType=ARS
The text of the statute (and it changes over time, so don't rely on my posting here for anything but the beginning of your educational process):
33-1101. Homestead exemptions; persons entitled to hold homesteads
A. Any person the age of eighteen or over, married or single, who resides within the state may hold as a homestead exempt from attachment, execution and forced sale, not exceeding one hundred fifty thousand dollars in value, any one of the following:
1. The person's interest in real property in one compact body upon which exists a dwelling house in which the person resides.
2. The person's interest in one condominium or cooperative in which the person resides.
3. A mobile home in which the person resides.
4. A mobile home in which the person resides plus the land upon which that mobile home is located.
B. Only one homestead exemption may be held by a married couple or a single person under this section. The value as specified in this section refers to the equity of a single person or married couple. If a married couple lived together in a dwelling house, a condominium or cooperative, a mobile home or a mobile home plus land on which the mobile home is located and are then divorced, the total exemption allowed for that residence to either or both persons shall not exceed one hundred fifty thousand dollars in value.
C. The homestead exemption, not exceeding the value provided for in subsection A, automatically attaches to the person's interest in identifiable cash proceeds from the voluntary or involuntary sale of the property. The homestead exemption in identifiable cash proceeds continues for eighteen months after the date of the sale of the property or until the person establishes a new homestead with the proceeds, whichever period is shorter. Only one homestead exemption at a time may be held by a person under this section.
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Sound good? Well, it would, except that it's not as simple as it seems.
And that's because there's a bankruptcy cap on homesteads that may be applicable, and that's located here:
11 usc 522 (p)
(p)
(1) Except as provided in paragraph (2) of this subsection and sections 544 and 548, as a result of electing under subsection (b)(3)(A) to exempt property under State or local law, a debtor may not exempt any amount of interest that was acquired by the debtor during the 1215-day period preceding the date of the filing of the petition that exceeds in the aggregate $125,000 in value in—
(2)
(A) The limitation under paragraph (1) shall not apply to an exemption claimed under subsection (b)(3)(A) by a family farmer for the principal residence of such farmer.
(B) For purposes of paragraph (1), any amount of such interest does not include any interest transferred from a debtor’s previous principal residence (which was acquired prior to the beginning of such 1215-day period) into the debtor’s current principal residence, if the debtor’s previous and current residences are located in the same State.
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Yes, you read that correctly. There's a cap on homesteads that applies (unless you're a family farmer, which would mean you'd probably be filing a Chapter 12) to purchases within a specific time period (1215 days prior to the date of filing the petition).
Arizona has it's own opinion on this issue, which discusses the effective date of the provision, and it's therefore probably less important now than it was when it was written. It's still a very well-written opinion on an issue of great importance to every Arizona debtor, the homestead exemption.
So here's the citation to the case, In re McNabb, 326 B.R. 785 (Bankr. D. Ariz. 2005). For what it's worth, I strongly agree with Judge Haines interpretation of the law.
Disclaimer: The bankruptcy information in this blog is not intended as a substitute for competent legal advice on bankruptcy law in Arizona by a board certified bankruptcy attorney (an attorney recognized by the Arizona Board of Legal Specialization as a Certified Specialist in Bankruptcy Law), and nothing in the foregoing constitutes legal advice; this blog is intended merely as one source of bankruptcy information about Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Chapter 11 Bankruptcy, and Chapter 12 Bankruptcy. Mind you, it doesn't hurt if the attorney you decide to retain has a Martindale-Hubbell AV rating.
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Yes, you read that correctly. There's a cap on homesteads that applies (unless you're a family farmer, which would mean you'd probably be filing a Chapter 12) to purchases within a specific time period (1215 days prior to the date of filing the petition).
Arizona has it's own opinion on this issue, which discusses the effective date of the provision, and it's therefore probably less important now than it was when it was written. It's still a very well-written opinion on an issue of great importance to every Arizona debtor, the homestead exemption.
So here's the citation to the case, In re McNabb, 326 B.R. 785 (Bankr. D. Ariz. 2005). For what it's worth, I strongly agree with Judge Haines interpretation of the law.
Disclaimer: The bankruptcy information in this blog is not intended as a substitute for competent legal advice on bankruptcy law in Arizona by a board certified bankruptcy attorney (an attorney recognized by the Arizona Board of Legal Specialization as a Certified Specialist in Bankruptcy Law), and nothing in the foregoing constitutes legal advice; this blog is intended merely as one source of bankruptcy information about Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Chapter 11 Bankruptcy, and Chapter 12 Bankruptcy. Mind you, it doesn't hurt if the attorney you decide to retain has a Martindale-Hubbell AV rating.
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