Arizona Bankruptcy Exemption Laws

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• AZ Exemptions
• May record homestead declaration to clarify which one of multiple eligible parcels is being claimed as homestead
  Ariz. Rev. Stat. § 33-1102
  
• Real property, an apartment, or mobile home you occupy to $150,000; sale proceeds exempt 18 months after sale or until new home purchased, whichever occurs first (husband & wife may not double)
  Ariz. Rev. Stat. § 33-1101 (A)
  

• Annuity contract if beneficiary is dependent & owned at least two years
  Ariz. Rev. Stat. § 33-1126 (A)(7)
  
• Fraternal benefit society benefits
  Ariz. Rev. Stat. § 20-877
  
• Group life insurance policy or proceeds
  Ariz. Rev. Stat. § 20-1132
  
• Health, accident, or disability benefits
  Ariz. Rev. Stat. § 33-1126 (A)(4)
  
• Life insurance cash value if beneficiary is dependent & owned at least two years
  Ariz. Rev. Stat. § 33-1126 (A)(6)
  Ariz. Rev. Stat. § 20-1131 (D)
  
• Life insurance or annuity proceeds to $20,000 if beneficiary is spouse or child
  Ariz. Rev. Stat. § 33-1126 (A)(1)
  

• Alimony, child support needed for support
  Ariz. Rev. Stat. § 33-1126 (A)(3)
  
• All property exempt against claims of unpaid state taxes on pension income, levied by other states
  Ariz. Rev. Stat. § 33-1151
  
• Minor child's earnings, unless debt is for child
  Ariz. Rev. Stat. § 33-1126 (A)(2)
  

Special Rules for Retirement Accounts

Under a new provision of the bankruptcy law, enacted in October 2005, virtually all types of pension and retirement accounts recognized by the IRS are completely exempt regardless of what state you live in.

This provision exempts"retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under Sections 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code."

This list covers 401(k)s, 403(b)s, profit-sharing and money purchase plans, IRAs (including SEP and SIMPLE plans), as well as defined-benefit plans.

The exemption applies whether you rely on the list of federal bankruptcy exemptions (11 U.S.C. 522(d)(12)) or the exemption laws of your own state (See 11 U.S.C. 522(b)(3)(C)). Section 522(b)(4) spells out the specific requirements for qualifying under these provisions.

These exemptions are unlimited, except for Roth and traditional IRAs, which are capped at an aggregate IRA account value of $1 million per individual (adjusted every three years for inflation). (See 11 U.S.C. 522(n))

SEP and SIMPLE IRAs, along with all other types of non-IRA retirement accounts such as 401(k)s and 403(b)s, are completely exempt.

More Info

For more details, see an excellent summary of how retirement accounts are treated under the new bankruptcy law from the August 2005 issue of the Journal of Financial Planning.

References to the Internal Revenue Code

The new bankruptcy law exemption for retirement accounts includes all funds "exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986."
Those sections cover:

• 401 (a qualified pension, profit-sharing and stock bonus plan created under a trust established by an employer for the exclusive benefit of employees or beneficiaries)
• 403 (qualified annuity plans that are established by an employer for an employee under IRC 404(a)(2) or 501(c)(3))
• 408 (IRAs)
• 408A (Roth IRAs)
• 414 (other retirement plan for controlled groups of employees such as churches, partnerships, proprietorships, and governments)
• 457 (eligible deferred compensation plans) or
• 501(a) (retirement plans established and maintained by tax-exempt organizations, e.g. churches, nonprofit organizations)

Special 'exclusion' of education accounts

Under the new bankruptcy law, education savings accounts or education IRAs created under sections 529 or 530 of the Internal Revenue Code are 'excluded' from the bankruptcy estate (not quite the same as 'exempt' but with the same result).

See, 11 U.S.C. 541(b)(6), (529 Education Tuition Plans) and 11 U.S.C. 541(b)(5) (530 Coverdell IRAS)

NOTE: Even though these education accounts are excluded from the bankruptcy estate, you still must list them on your forms (See section (11 U.S.C. 521(c).)

Also excluded are:

• benefits governed by ERISA (Click here for government info on ERISA and pension.)
• 414(d)(governmental retirement plans),
• IRC 457 (deferred compensation)
• 403(b)( tax deferred annuity plan including church plans, etc)

See 11 U.S.C. 541(b)(7)

• Board of regents members, faculty and administrative officers under board's jurisdiction
  Ariz. Rev. Stat. § 15-1628 (I)
  
• District employees
  Ariz. Rev. Stat. § 48-227
  
• ERISA-qualified benefits deposited over 120 days before filing
  Ariz. Rev. Stat. § 33-1126 (B)
  
• Firefighters
  Ariz. Rev. Stat. § 9-968
  
• IRAs, Roth IRAs deposited over 120 days before filing
  Ariz. Rev. Stat. § 33-1126 (B)(IRAs & Roth Iras)
  
• Police officers
  Ariz. Rev. Stat. § 9-931
  
• Public Safety Personnel Retirement System benefits, contributions, interest & credits
  Ariz. Rev. Stat. § 38-850 (C)
  
• Rangers
  Ariz. Rev. Stat. § 41-955
  
• State employees retirement and disability
  Ariz. Rev. Stat. § 38-792
  Ariz. Rev. Stat. § 38-797.11
  

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• Bank deposit to $300 in one account
  Ariz. Rev. Stat. § 33-1126 (A)(9)
  
• Bible; bicycle; sewing machine; typewriter; computer, burial plot; rifle, pistol, or shotgun to $1000 total
  Ariz. Rev. Stat. § 33-1125
  
• Books to $250; clothing to $500; wedding & engagement rings to $2,000; watch to $150; pets, horses, milk cows, & poultry to $800; musical instruments to $400
  Ariz. Rev. Stat. § 33-1125
  
• Equity in one motor vehicle to $6,000 ($12,000, if debtor is physically disabled)
  Ariz. Rev. Stat. § 33-1125 (8)
  
• Food & fuel to last 6 months
  Ariz. Rev. Stat. § 33-1124
  
• Funeral deposits to $5,000
  Ariz. Rev. Stat. § 32-1391.05 (4)
  
• Health aids
  Ariz. Rev. Stat. § 33-1125 (9)
  
• Household furniture and furnishings, household goods, including consumer electronic devices, and household appliances personally used by the debtor or a dependent of the debtor and not otherwise specifically prescribed in this chapter are exempt from process provided their aggregate fair market value does not exceed $6,000.
  Ariz. Rev. Stat. § 33-1123
  
• Prepaid rent or security deposit to $2,000 or 1-1/2 times your rent, whichever is less, in lieu of homestead
  Ariz. Rev. Stat. § 33-1126 (C)
  
• Proceeds for sold or damaged exempt property
  Ariz. Rev. Stat. § 33-1126 (A)(5),(8)
  
• Wrongful death awards
  Ariz. Rev. Stat. § 12-592
  

• Unemployment compensation
  Ariz. Rev. Stat. § 23-783 (A)
  
• Welfare benefits
  Ariz. Rev. Stat. § 46-208
  
• Workers' compensation
  Ariz. Rev. Stat. § 23-1068
  

• Arms, uniforms, & accoutrements of profession or office required by law
  Ariz. Rev. Stat. § 33-1130 (3)
  
• Farm machinery, utensils, seed, instruments of husbandry, feed, grain, & animals to $2,500 total, if debtor's income is primarily from farming.
  Ariz. Rev. Stat. § 33-1130 (2)
  
• Library & teaching aids of teacher
  Ariz. Rev. Stat. § 33-1127
  
• Tools, equipment, instruments, & books, comtact lists, websites, domain names, marketing material or any other intangibe work-product in debtor's posession to $5,000
  Ariz. Rev. Stat. § 33-1130 (1)
  

• 75% of earned but unpaid weekly net earnings or 30 times the federal minimum hourly wage; 50% of wages for support orders; bankruptcy judge may authorize more for low-income debtors
  Ariz. Rev. Stat. § 33-1131