The Arizona bankruptcy exemption states that a bankruptcy debtor(s) may exempt:
“Interest in real property upon which debtor’s house
sits, condominium or cooperative, mobile home, or
mobile home in which debtor resides plus the land
upon which the mobile home is located in the amount
of $150,000. May not be doubled by husband and
This means that you may have $150,000 equity in your residence when you file bankruptcy, without having to turn any funds over to creditors.
Examples of how this works in the real world:
Example 1 – Chapter 7 and the Arizona Homestead Exemption.
Assume you own a home. Assume that home’s fair market value is $200,000.00 and you owe $150,000.00 to the bank on a first mortgage. This gives you exactly $50,000.00 in equity. In this example, if you file for chapter 7 bankruptcy protection in Arizona, you could claim the Arizona Homestead bankruptcy exemption for your home, and protect your $50,000.00 of equity.
Example 2 – Chapter 7 and the Arizona Homestead Exemption.
Assume everything in the example above, however, assume you own your home free and clear, with no mortgage. In this scenario, you would still claim your Arizona homestead exemption, and you would still be able to protect $150,000.00 equity. $50,000.00 would be left unprotected and available to creditors. The Result; either you would have to sell the house, keep $150,000.00 from the sale, and turn over $50,000.00 to creditors, or come up with some sort of acceptable payment arrangement of the $50,000.00 to your creditors.
Example 3 – Chapter 13 and the Arizona Homestead Exemption.
Assume everything in the above example. In this scenario, you would still protect the $150,000 you have. In this example, you would have 3 or 5 years to pay at a minimum, $50,000.00 in your Chapter 13 bankruptcy plan.
The Arizona bankruptcy homestead exemption is widely considered fair and perhaps generous compared to other jurisdictions. Bankruptcy being a theory of equity, the exemption is rooted in the policy that debtors should be able to maintain a standard living environment when facing harsh economic conditions.