Help for self-employed debtors and others. (DEBTORS IN ARIZONA CAN NOW KEEP THEIR iPad)
The following is current as of April 24, 2013. Bankruptcy exemptions can change based on new laws, and interpretation of current laws by the courts.
Arizona Bankruptcy Laws have changed in a significant way, as the updated exemptions will make it harder for creditors to force the sale of the assets of a person filing bankruptcy (“debtor”).
Bankruptcy laws are federal laws, but they give the states a significant voice in choosing how the bankruptcy laws affect debtors in their state by allowing each state to choose what exemptions a debtor can claim. When a person files bankruptcy, they are required to list all of their assets. They are then allowed to claim exemptions on those assets if there is an exemption that applies to the asset. A bankruptcy trustee is appointed for the case who will determine what assets need to be liquidated for the benefit of the creditors. An exempt asset cannot be liquidated, and the debtor is allowed to keep the asset.
Exemptions allow debtors to keep the items necessary for them to live and be a productive member of society. For example, a debtor can claim an exemption on her car, up to a certain amount of equity, so she can go to work and manage her life.
Attorneys for debtors championed the bill changing the bankruptcy law; bankruptcy trustees opposed who represent the interests of creditors in a bankruptcy opposed the law. The last time that bankruptcy laws in Arizona were substantively changed was thirty-one years ago, in 1982. The bankruptcy exemptions in Arizona were outdated and did not reflect what people need to be productive. There is a law firm focused on chapter 13 bankruptcy that tries their maximum effort to avoid bankruptcy which should be the last option, by suggesting other possible ways to survive in society.
When the prior bankruptcy exemptions were written for Arizona in 1982, computers (not to mention smart phones, tablets, and other electronics) were not considered by Arizona lawmakers to be a necessary item to have in the home. Now it is hard for many people to imagine functioning without a computer and electronic devices (such as an iPad) in their homes. Many homes are dependent on computers for telephone and other forms of communication that we now consider essential.
Two of the changes to Arizona exemption statutes are especially significant:
Arizona Revised Statutes 33-1123 Household furniture, furnishing and appliances.
This exemption was a specific list of items that could be exempted, including “one radio alarm clock” but not including a personal computer. The old list of exemptions is below:
1. One kitchen and one dining room table with four chairs each, plus one additional chair for each dependent of the debtor who resides in the household if the debtor and dependents exceed four in number.
2. One living room couch.
3. One living room chair, plus one additional chair for each dependent of the debtor who resides in the household.
4. Three living room coffee or end tables.
5. Three living room lamps.
6. One living room carpet or rug.
7. Two beds, plus one additional bed for each dependent of the debtor who resides in the household.
8. One bed-table, dresser and lamp for each bed allowed by paragraph 7.
9. Bedding for each bed allowed by this section.
10. Pictures, oil paintings and drawings, drawn or painted by debtor and family portraits in their necessary frames.
11. One television set or radio or stereo.
12. One radio alarm clock.
13. One stove.
14. One refrigerator.
15. One washing machine.
16. One clothes dryer.
17. One vacuum cleaner.
This exemption has changed from a specific list of items to a broad list. The old phrase was “The following household furniture, furnishings, and appliances . . .” has been changed to “Household furniture and furnishings, household goods including consumer electronic devices, and household appliances . . .” In the old version only those items on the list were able to be exempted. The list of specific items has been deleted. Now the exemption allows for broad categories that specifically includes “consumer electronic devices”. A person who bought appliances from baltimoreappliancerepairshop.com and later had to face bankruptcy had his proceedings done based on the exemptions.
There was not a good exemption for the iPad or smart phone prior to this change, and if the creditors or the trustee objected to the exemption claimed, the debtor would often be required to pay the trustee the value of their electronics so they could keep their iPad.
The exemption amount for household items has increased from $4,000 per debtor to $6,000. (This means that a married couple can now claim $12,000 in exemptions for their household items.)
The other major change in the exemptions is:
Arizona Revised Statutes 33-1130 Tools and equipment used in a commercial activity, trade, business or profession.
This statue has also been updated to reflect the reality of changes in our society. The amount of value in “Tools, equipment, instruments and books” was changed from $2,500.00 to $5,000.00. A list of example items was also added to show the reality that intangible assets are often the most valuable asset of a business. The list includes “telephone numbers, client or customer contact information, or marketing tools, such as websites, domain names or any other intangible work product”.
A self-employed debtor is likely to have customer lists and a website, and often would not be able to conduct ongoing business if these items were taken and sold in a bankruptcy. Think of insurance agents, accountants, bookkeepers, lawyers or other businesses where a service is offered. This change to the exemption helps protect their ability to continue operating their business and claim their website and customer list as an exempt asset.
Other changes to the exemption statutes include a change in dollar amount that can be claimed for:
– Musical instruments from $200 to $400
– Equity in a motor vehicle from $5,000 to $6,000 (physically disabled debtors from $10,000 to $12,000)
– Money in a bank account from $150 to $300
– Rent security deposit from $1000 to $2000
If you are considering filing for bankruptcy it is important to make sure that the bankruptcy exemptions are properly applied in your case. The Carroll Law Firm offers a free consultation for bankruptcy so that you can speak directly with an experienced bankruptcy attorney regarding how bankruptcy and the bankruptcy exemptions will affect you. Call (623) 551-9366 to schedule your free consultation.
Updated Arizona Bankruptcy Exemptions
The changes to the Arizona statutes showing the old language with a strikethrough, and the new language in ALL CAPS may also be downloaded below, or from the Arizona State Legislature website at: http://www.azleg.gov/legtext/51leg/1r/laws/0123.pdf.
