Proposed Changes to Arizona Bankruptcy Law

Bill Would Update Permissible Items While Filing Bankruptcy in Arizona

House Bill 2325 Would Update the Current Arizona Bankruptcy Laws

According to the Arizona Daily Star, the head of the House Judiciary Committee, (Rep. Eddie Farnsworth, a Republican from Gilbert, Arizona), wants to update Arizona’s dated and sometimes anachronistic bankruptcy laws.  The proposal can’t change the process that allows individuals to seek protection from creditors. Those are set in federal law.  However, the proposal can change what a person in Arizona who is filing bankruptcy can keep.  The federal bankruptcy laws allow states to make the decision on a state by state basis as to what they are allowed to keep when filing for bankruptcy protection. Farnsworth believes that Arizona’s list of what a person can keep when filing for bankruptcy protection is long overdue for an overhaul.  Farnsworth believes that the current list of what a person can keep is too specific.

For instance:  Consider: The Arizona law allows debtors to keep one kitchen table and one dining room table with four chairs each. They can keep additional chairs if there are more than four in the house.  Where this seems reasonable, it is a bit too specific for the ever-changing items within a household today.

The list of permissible items also includes three living room lamps, one radio alarm clock, one vacuum cleaner and a choice of one television set, radio or stereo.  The total value of  household goods that an Arizona person can keep in a bankruptcy filing cannot exceed $4,000.  House Bill 2325 would keep that $4,000 limit for household items. But it would strike the specifics of what can be included, to give those in bankruptcy some individual choices in deciding what’s important to them.

“One person may have a hutch from their great grandmother that they want,” Farnsworth explained. “Somebody else may have a clock that’s important, or two clocks that are family heirlooms. This just gives them flexibility within the already established cap on exempted property.”

Another section of existing law gets into other kinds of items that are off-limits to creditors. Individuals can keep all their musical instruments – but only up to a fair market value of $200. Farnsworth’s legislation would double that figure and make the musical instrument allowance $400.  Ditto for an allowance for all engagement and wedding rings, with the new cap on their total value proposed to go to $2,000.

The current Arizona bankruptcy law even deals with domestic pets, horses, milk cows, and poultry. These now can be shielded from bankruptcy if they’re worth no more than $500; Farnsworth’s legislation moves that figure to $800. And an individual would be able to have up to $6,000 equity in a motor vehicle, up by $1,000, and $300 in a bank account, double the current limit of $150.  Finally, Farnsworth wants to bring Arizona’s law into the 21st century – or at least the late 20th century.

As the statute exists, individuals can keep one typewriter, one bicycle, one sewing machine, a family Bible, a lot in any burial ground, and one shotgun, rifle, or pistol, though there is an aggregate limit on value of $500. The current bankruptcy statute seems to be missing a couple of the most popular “everyday” items.

Farnsworth newly proposed HB 2325 would not only update that total figure to $1,000 but the new HB 2325 would also add one other thing to that list: a computer.  Computers weren’t a relevant staple in the majority of households back when the law was created as they are today.

And that may not be the last word.  Farnsworth acknowledged that there is another piece of technology which has become indispensable for many – and is a tool a person in dire financial straights may need to seek and/or keep a job: that is a cellphone. He said the legislation could be altered as it goes through the hearing process.  HB 2325 is simply updating the current household exemption list for people declaring bankruptcy in Arizona.  It is a much needed update as times change while the laws remain the same.  Hats off to Farnsworth for spearheading HB 2325.

 

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