What is Prop 209?
Proposition 209 was recently overwhelmingly approved by Arizona voters over the most recent election in November 2022 with more than 70 percent of the voters’ approval rating. This Proposition was touted by the media as a new rule limiting medical creditors from charging more than 3 percent interest on outstanding medical debt. However, many people may not realize that other benefits to this new law will help you file bankruptcy. In this article, I will discuss some of the more important rule changes that will help you keep important property such as your home, car, possessions and money.
HOMESTEAD EXEMPTION
Recently, the Arizona legislature approved an initiative to increase the Arizona Homestead Exemption (A.R.S. Sect. 33-1011(A) & (D)) from $150,000 to $250,000. However, Prop 209 further increases the Homestead Exemption from $250,000 to $400,000. Your Homestead Exemption protects equity in your home from the reach of creditors. For example, let’s say your home is worth $300,000 and you have a mortgage of $200,000. The difference between what you owe and the value of your home is equity. Equity is protected by your Homestead Exemption. In bankruptcy, your home is protected from forced sale by up to $400,000 of equity, which means, as long as your home has less than $400,000 of equity, your home is safe in a bankruptcy filing.
VEHICLE EXEMPTION
Prior to Prop 209, everyone who files bankruptcy may protect up to $6,000 of equity in one motor vehicle (A.R.S. § 33-1125(A)(8)). With the new law, everyone who files bankruptcy can protect up to $15,000 of equity in a car. Generally, there is a misconception that people can keep a home and a car when filing bankruptcy. The misconception is somewhat misguided because of the limitations placed on consumers from the prior law. However, this new law makes it that much easier to keep those properties. People of Arizona can rest assured that keeping your home and car is much more possible than it was previously. Additionally, married couples can double up on this exemption and protect up to $30,000 of equity in one car, or they each get a $15,000 exemption to protect one car. The limits increase further for those who have a handicap plate or placard.
MONEY IN YOUR BANK ACCOUNT
Before Prop 209, anyone who files bankruptcy could only protect up to $300 in one bank account on the day of filing your case. To make this clear, in a bankruptcy filing, a bankruptcy trustee is going to review your bank statements, calculate the exact amount of money in your bank account on the day your case was filed. Any money above the $300 threshold is subject to being forcibly turned over to the trustee. The trustee uses these funds to pay a disbursement to your creditors. However, with the new rules in Prop 209, you can now safely protect up to $5,000 in one bank account on your date of fling, which is a substantial increase making it much easier to consider filing bankruptcy and keeping your money and property safe. See A.R.S. § 33-1126(A)(9).
HOUSEHOLD GOODS & FURNISHINGS
In bankruptcy, you are required to disclose all property you own including things such as your household goods and furnishings. In most cases, you would use a fair market resale value for such items rather than the actual retail value from when you bought the item. The old rules allowed everyone who files bankruptcy to protect up to $6,000 worth of household goods and furnishings or $12,000 for married couples. See A.R.S. § 33-1123 (A) and (B). The new rules of Prop 209 now allow for up to $15,000 worth of household goods and furnishings to be protected. This is another added benefit to allowing consumers to feel safe about filing bankruptcy and having the ability to keep all your belongings.
If you were on the fence about filing bankruptcy because you were unsure about whether you would be able to keep your possessions and file, you should be able to feel much safer with the prospect of filing bankruptcy. The people of Arizona should be able to live in a world free of overwhelming debt. If you have found yourself in an untenable situation where you can no longer afford to live the lifestyle you want because of debt, give me a call so we can discuss how a bankruptcy could help you solve this problem. Call me today at 623-777-4760 or visit my website at www.gaudiosilaw.com.
