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Arkansas Bankruptcy Laws
Arkansas is a rare state in that there are nearly equal numbers of petitions for Chapter 7 and Chapter 13 bankruptcy. There are significant differences in those choices:
- Those with no assets or few assets may choose Chapter 7 in order to discharge much of their consumer debt (excluding child support, alimony, tax debts, or student loans)
- Those with significant property and some monthly disposable income may find Chapter 13 the best choice, reorganizing their debt and assets in order to pay back all their debt in anywhere from three to five years
Even those filing for Chapter 7 may call upon protections under federal and state laws that allow some elements of personal property to be exempt from liquidation. Arkansas allows debtors to choose to apply either federal or state exemptions when filing for Chapter 7 bankruptcy, whichever is most advantageous.
Arkansas’s key state exemptions include:
Homestead |
Either option A OR B:
A: $2,500 for head of family
B: Up to $800 if single, up to $2,500 if married |
Personal Property |
Up to $1,200 for motor vehicle; some jewelry; burial plot; clothing (unlimited); prepaid funeral trusts |
Wages |
Wages due for 60 days that are earned but unpaid, but no less than $25/week |
Pensions |
Tax exempt retirement accounts; traditional/Roth IRAs up to $1,095,000/person; state police; school employees; firefighters; disabled police officers |
Public Benefits |
Worker’s comp; unemployment; crime victim’s compensation |
Tools of Trade |
Up to $750 in tools, books, and implements |
Insurance |
Some life, health, accident or disability benefits, paid or due; fraternal benefits; group life insurance; disability benefits; annuity contracts |
Miscellaneous |
Up to $500 of any personal property if married, up to $200 if single |
Before filing for bankruptcy in Arkansas, the debtor and their bankruptcy attorney must carefully consider their options. Once those decisions are made and the consumer has fulfilled the credit counseling requirement, the petition is filed and the court halts all collection efforts. The bankruptcy trustee helps formulate a plan to liquidate eligible property and discharge most debt (Chapter 7) or to pay off remaining debt in three to five years (Chapter 13). They must also attend a 341 meeting with the bankruptcy trustee and the creditors before the proceeding is complete to answer any questions about the upcoming plan.
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