This is question everyone asks and for good reason. Everyone is worried about keeping their property and we don’t blame them. You worked hard for it. Most states require you to use state exemptions when you file for bankruptcy. Arkansas allows you to choose between Arkansas or Federal exemptions. However, you must pick one system or the other (you cannot mix and match).
What is Equity in Bankruptcy?
All these numbers relate to equity – the amount your property is worth minus the amount you owe on that property. Examples – 1) Your car is worth $12,000 on Kelly Blue Book in good condition and you owe $15,000, then you have $0.00 in bankruptcy; 2) Your house is worth $125,000 and you owe $105,000, then you have $20,000 in equity.
If a debt is secured by property, such as a car or home, and you are current on the payments and the equity is covered by your exemptions, you can keep making payments on the loan and keep this property through the bankruptcy. Generally, if you have non-exempt property, you must pay the trustee the value of the non-exempt property in order to keep the property.
Common Exemptions (you can double if you’re filing with your spouse and the property is owned jointly). All code references are to 11 U.S.C. (Title 11 of the United States Code).
522(d)(1), (5) – Real property, including mobile homes and co-ops, or burial plots up to $23,675. Unused portion of homestead, up to $11,850 may be used for any other property.
522(d)(2) – Motor vehicle up to $3,775.
522(d)(3) – Animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments up to $600 per item, and up to $12,625 total.
522(d)(4) – Jewelry up to $1,600.
522(d)(9) – Health aids.
522(d)(11)(B) – Wrongful death recovery for person you depended upon.
522(d)(11)(D) – Personal injury recovery up to $23,675 except for pain and suffering or for pecuniary loss.
522(d)(11)(E) – Lost earnings payments.
522(b)(3)(C) – Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).
522(b)(3)(C)(n) – IRAS and Roth IRAs to $1,283,025.
522(d)(10)(A) – Public assistance, Social Security, Veteran’s benefits, Unemployment Compensation.
522(d)(11)(A) – Crime victim’s compensation.
Tools of Trade
522(d)(6) – Implements, books and tools of trade, up to $2,375.
522(d)(10)(D) – Alimony and child support needed for support.
522(d)(7) – Unmatured life insurance policy except credit insurance.
522(d)(8) – Life insurance policy with loan value up to $12,625.
522(d)(10)( C ) – Disability, unemployment or illness benefits.
522(d)(11)( C ) – Life insurance payments for a person you depended on, which you need for support.
522(d)(5) – $1,250 of any property, and unused portion of homestead up to $11,850.
Here are the more common exemptions available under Arkansas law. Spouses filing a joint bankruptcy in Arkansas can double the exemption amount if they both own the property (except for the homestead exemption). (References are to the Arkansas Code Annotated or the Arkansas Constitution.)
Homestead or residential property
Choose 1 or 2, but not both.
- Unlimited amount of equity in 80 rural acres or one-quarter urban acre. If the land isn’t worth $2,500, you can increase the acreage up to 160 rural acres and one urban acre, up to a total equity value of $2,500 in value.
- Real or personal property used as a residence up to $800 if single or $1,250 if married. (Ark. Const. Art. 9 §§ 3, 4, 5, 6; Ark. Code Ann. §§ 16-66-210, 212, 218)
All clothing; a single person who is not the head of the family can keep $200 worth of any other type of property. The amount increases up to $500 for a married person or head of the family. (Ark. Const. Art. 9 §§ 1 and 2, Ark. Code Ann. § 16-66-218); motor vehicle up to $1,200 (Ark. Code Ann. § 16-66-218); tools needed in your trade or profession up to $750 (Ark. Code Ann. § 16-66-218); wedding bands (Ark. Code Ann. §§ 16-66-218, 219); life, health, and disability insurance payments (Ark. Code Ann. § 16-66-209); pension or retirement account up to $20,000 (Ark. Code Ann. § 16-66-220). (More exemptions could be available for retirement benefits. See Filing Bankruptcy and Retirement Accounts.)
Workers’ compensation (Ark. Code Ann. § 11-9-110); unemployment compensation (Ark. Code Ann. § 11-10-109); crime victims’ compensation (Ark. Code Ann. § 16-90-716).
This is not a complete list, additional exemptions exist. Also, Arkansas updates exemption amounts periodically. If this is a little confusing, feel free to call, 501.891.6000, or set up a free consultation by clicking here.