When the decision regarding filing for bankruptcy in Arizona is made, one of the main questions the person will have has to do with what will happen with money, benefits or proceeds. The laws of the state are in place to protect certain payments from being lost. Bankruptcy exemptions vary and will depend on the individual situation. It is important to know what is exempt and what isn't before filing so there are no surprises.
If there is life insurance for the deceased spouse, parent or legal guardian and it is not greater than $20,000 payable to the surviving spouse or child, it is safe from the proceeding. If the minor child has earnings, these will be exempt unless the debt that is going to be discharged in the bankruptcy proceeding was under contract for the special benefit of the child. A common worry is whether spousal support or child support will be part of the proceeding - they won't be if they were part of a court order. Benefits from health insurance from an employer, disability, accident insurance or other benefit programs from employers are not subject to liquidation. In the event there was destruction to a property that was exempt and proceeds were received, this is exempt too.
If there was prepaid rent for the residence of the debtor and it does not exceed $2,000, as long as the debtor hasn't made a claim for a homestead exemption, it is exempt. So too are benefits from a plan that falls under the Employee Retirement Income Security Act. Compensation that is deferred cannot be touched aside from the amounts that were contributed into the ERISA plan 120 days prior to filing for bankruptcy. A bank deposit cannot exceed $300 or it can be part of the proceeding. Life insurance policies and annuities can be protected depending on the amount of time - usually two years - they've been in effect.
While filing for bankruptcy might be a daunting prospect, it is often the best way for a person to get back on his or her financial feet and move forward. Understanding bankruptcy exemptions can be complicated as can the legal hurdles that accompany the filing. For assistance and information, it's always wise to discuss the matter with a qualified legal professional before moving forward.
Source: AZB.USCourts.gov, "Exemptions In Arizona," accessed on Oct. 19, 2014
