Does Arizona’s homestead exemption protect my house from being sold in a Chapter 7 bankruptcy?

Determining whether your home

Determining whether your home will be sold in bankruptcy depends on the amount of equity in the home. Every state, except three, has a homestead exemption that protects a specific value or a specific acreage of a primary home. This means that a certain amount of equity is protected from unsecured creditors. The federal government and each state have exemption limits. The statutory limit for a homestead exemption in Arizona is $150,000. A state’s exemption limit may apply if the home was bought at least 40 months prior to filing for bankruptcy. The federal exemption of $136,875, instead of the state’s exemption, applies to a homeowner that has lived in their home less than the required time.

Once you file for bankruptcy, if there is enough nonexempt equity in your home to pay unsecured creditors after all liens and encumbrances that have priority have been paid, then the trustee in a Chapter 7 bankruptcy will choose to sell the home. For example, the trustee may sell a home in Arizona that has $200,000 in equity, but not sell a home that has only $50,000.

To determine the specific action you should take, it may help to contact a bankruptcy attorney. An attorney can help you decide the best way to proceed.