ARIZONA STATE SENATE

Phoenix, Arizona

REVISED

FACT SHEET FOR S.B. 1175

Personal property exemption: automobile

Purpose

Increases the fair market value (FMV) exemption for a personal motor vehicle during a bankruptcy proceeding.

Background

Although bankruptcies occur in federal court, each state sets the value of personal property that may be exempted from the process. When a person enters bankruptcy court, certain items are exempt from bankruptcy proceedings under Arizona law, including vehicles up to a value of $1,500 or up to $4,000 if the debtor is physically disabled. S.B. 1175 increases the values to $5,000 and $10,000 respectively.

In the joint bankruptcy filing of spouses, spouses may combine their exemptions or each spouse may separately declare the allowable exemption (A.R.S. 33-1121.01). Therefore, under this bill, vehicles valued under $5,000 are exempt. Spouses jointly filing for bankruptcy could exempt up to a total of $10, 000 in FMV for their vehicle or vehicles.

Current statutory limits regarding the FMV of vehicles have not increased since 1976 or kept pace with inflation. Some practicing bankruptcy attorneys believe current values are below the cost of reasonable and reliable transportation.

The anticipated fiscal impact of S.B. 1175 on the state general fund is expected to be minimal.

Provisions

1. Increases, from $1,500 to $5,000, the motor vehicle FMV exemption in bankruptcy proceedings.

2. Increases, from $4,000 to $10,000, the FMV exemption in bankruptcy proceedings

for individuals who are physically disabled.

3. Provides for a general effective date.

Amendment Adopted by Committee

Changes language in statute from “maimed or crippled” to “physically disabled.”

Senate Action

JUD 1/30/01 DPA 7-0-1-0 1/30/01 DPA 7-0-1-0

Prepared by Senate Staff

February 2, 2001