Arizona’s homestead exemption laws (A.R.S. §§ 33-1101 – 1105) forbid a creditor from taking one’s home in a bankruptcy or other debt proceeding. This law protects up to $150,000 of equity from the home in which you reside from attachment, execution, or forced sale.
 
In Arizona, the exemption is automatic. The exemption means that if an individual is forced to file bankruptcy or otherwise owes money to a creditor and has less than $150,000 of equity in his home, he will be able to keep his home. However, if he has more than $150,000 in equity he can be forced to sell his home with the creditors taking any sale amount over $150,000 if the sale will cover the full debt owed to the creditor and still give $150,000 to the homeowner from the sale. According to Arizona law, the debtor/homeowner then has up to 18 months to reinvest the $150,000 he receives from the sale of his home into a new home or else he forfeits the money to his creditors.
 
Only one homestead exemption may be claimed per married couple. This makes sense as the law assumes that married couples reside together. The exemption does not apply to liens made against the actual home. Therefore, a bank can still foreclose on your home if the home itself is the security on a consensual lien. Furthermore, the exemption does not apply to child support payments or spousal maintenance that may be in arrears.
 
Arizona’s exemption limit is higher than most states. Alaska, for example, only exempts up to $54,000 in equity. New Mexico and Colorado top out at $60,000.  Many states only allow $20,000 or less. Some states, however, such as Texas, have no monetary limit and a debtor can shield up to 200 acres of property from creditors.
 
In the personal injury world where the Rockafellow Law Firm operates, the homestead exemption often surfaces as a way of protecting negligent drivers who do not have adequate insurance from losing their homes. For example, a driver causes a collision and the victim accrues $50,000 in medical bills. The negligent driver only has a $15,000 car insurance policy, a home with $25,000 in equity, and a car with $1000 in equity. The victim cannot force this negligent driver to sell her home in order to pay his medical bills incurred as a result of the driver’s negligence.
 
Call the Rockafellow Law Firm if you have any questions about the homestead exemption and how it applies to personal injury law suits.