Under A.R.S. 33-1101, Arizona provides an exemption of $150,000 to homeowners. This exemption protects a sizable portion of the homeowner’s equity in their home from creditors and reflects the legislature’s opinion that a person’s home ought to have some minimum protection against creditors. The homestead exemption’s protections extend even into bankruptcy proceedings.
It used to be that documents had to be filed with the County Recorder’s office in order to invoke the homestead protection. However, back in the early 1990’s the laws in Arizona were changed such that the homestead exemption now applies automatically. Only in the case where you might own more than one residence would you be required to designate on which property the homestead exemption is to apply.
If you are in the process of selling your home, the title companies may inform you that any recorded judgments need to be paid on or before closing. However, that is not necessarily true. Only where the equity in the home exceeds the homestead exemption is this required. But, you may have to provide a copy of the statute to your title company or get an attorney involved to convince them of this.
Should you complete the sale of your home, you will have a limited amount of time to re-invest those proceeds back into another home. If you do not do so within the statutorily permitted time, those proceeds will lose their protection and become subject to collection efforts by creditors.
Arizona offers one of the more generous homestead exemptions. In the case where a person is considering bankruptcy, keep in mind that Arizona’s homestead exemption only applies after you
have lived in Arizona for a minimum amount of time. If you recently moved here from another state, you may have to rely on that state’s homestead exemption or the federal exemptions which can differ substantially from what Arizona law permits.
Note that the homestead exemption can be abandoned under certain statutorily defined ways. You should consult with a knowledgeable attorney if you are concerned about this possibility.