Exemptions

• In bankruptcy, a debtor's property is either exempt or not exempt. In Chapter 7 bankruptcy, a debtor can keep exempt property, but a debtor's nonexempt property is subject to sale by the trustee. The trustee will distribute the proceeds to the debtor's unsecured creditors.
  
  

Homestead Exemption

• A homestead exemption protects a portion of a debtor's primary residence from the bankruptcy trustee and creditors. In Arizona, real property, an apartment or mobile home occupied by the debtor is exempt up to $150,000. The proceeds from a sale are exempt for 18 months following the sale or until the debtor purchases a new home.
  
  

Case Law

• In re McNabb, the court ruled on whether the U.S. Bankruptcy Code's federal exemption limits applied to Arizona debtors. At issue was whether the debtor could claim Arizona's homestead exemption even though it exceeded the federal cap. The court found that because Arizona did not make federal exemptions available to debtors, the federal cap on the homestead exemption was inapplicable.