Everybody asks me what they get to keep and what they will lose. And so let me start by saying 98% of all bankruptcies that are filed are called “no-asset cases,” meaning that my clients keep everything that they own, everything, and that’s because everything is exempt from attachment by a creditor.
So let me explain what exempt from attachment means; and, in order to do that, I have to give you a brief history lesson. Bankruptcy started in this country in about 1870. Before 1870, if someone took you to court, got a judgment, obtained a writ of attachment, they could come to your house and take everything that you owned, everything, and sell it to satisfy the debt. Well, those people became destitute and wards of the state and then the government had to support those people. So the government wanted to stop that from happening. So they made a list of things that are exempt from attachment, meaning a creditor can’t touch it, and we still have a list like that today. Here are the basic things on that list in Arizona today:
If you have a home that has less than $150,000 of equity, it is exempt from attachment, meaning that so long as you make the payment, you keep the home. Remember the definition of equity: it’s the fair market value of the home, less the debt you owe on it. So, for example, if you own a home that has a fair market value of $200,000, and you owe the bank $100,000, you’ve got $100,000 of equity; it’s exempt from attachment. You keep that home so long as you make the payment.
The analysis is exactly the same for a car. Cars that are exempt from attachment are vehicles with less than $5,000 of equity in it. So, if it’s got less than $5,000 of equity in it, so long as you make the payment, you can keep the car.
As far as the rest of your personal property goes, what I tell my clients in consultation is look in your mind’s eye, is there any one piece of personal property that we can sell on Ebay or Craigslist or at an auction for $1,000 or more? Trustees are looking for $1,000 or more because that is a meaningful amount of money. They’re looking for coin collections, gun collections, stamp collections, fur coats, you know, collectible items, something with some commemorative value. If you don’t have anything like that, yours will be considered a no-asset case and you’ll keep everything. Even though you file bankruptcy, you’ll get the benefit of a discharge and all of your credit card debt will go away, your medical debt will go away, any other unsecured debt will go away.
I have a specific list on my website of what exactly is exempt in Arizona. Look for it, it’s easy to find, but remember it’s a two-part analysis: if it’s on the list, it’s exempt for sure. If it’s not on the list, the question becomes: Can the Trustee sell it for a meaningful amount of money, $1,000 or more? If they can’t, they’re not going to bother with it.