Bankruptcy Exemptions Expanded by Case Law

Before filing for bankruptcy, an individual should carefully review his or her assets and compare them to the exemptions available under state and Federal law to protect those assets from the bankruptcy trustee and other creditors.

This can be a pretty straightforward process where the statutory exemption is clear such as an exemption for a bicycle or for clothing. But some exemptions may be unclear and you might have questions as to whether your assets or property fall under the available exemption. In this circumstance it is extremely helpful to seek the advice of an experienced attorney who can perform an exemption analysis by integrating the case law developed by the courts in relation to the exemption statues.

For example: the Arizona homestead exemption located at A.R.S. 33-1101(a) provides a $150,000 exemption in “[t]he person’s interest in real property in one compact body upon which exists a dwelling house in which the person resides.” This statute seems simple and straightforward but as challenges to the interpretation of this statute are decided in the bankruptcy courts, we develop a body of case law that expands or restricts the application of the statute. In Arizona, there are cases holding that this same statute can apply to houseboats even though there is no mention of houseboats in the law. Another court in Arizona has found that the exemption applied to a vacant lot adjoining the homestead property even though, once again, that protection is not written in the statute.

These cases are decided by courts as the judges attempt to give meaning to the legislators’ intent and they tend to expand the reach of the exemption because the courts are instructed in the bankruptcy code to construe the exemptions liberally in favor of the debtor.

Don’t be discouraged if you have reviewed the exemption statutes and feel that you are not qualified to file for bankruptcy. You should seek the advice of a competent attorney that can work with you to protect your property with appropriate application of the exemption statutes and the related case law.

Please call 480-888-7111 to speak with a bankruptcy attorney from Nielsen Law Group about bankruptcy exemptions and protecting your property from creditors.

By: Levi S. Hatch