Arkansas Bankruptcy Exemptions and Law

Understanding which exemptions apply to your situation can be confusing, especially since Arkansas lets you choose between two exemption systems. If you are considering bankruptcy and want to know what you can keep, contact an Arkansas bankruptcy attorney. They can review your assets and help you choose the exemption system that best protects your property in your circumstances.

Arkansas Bankruptcy Law

Bankruptcy law comes from both federal and state sources. The federal Bankruptcy Code sets the main rules, and federal courts handle bankruptcy cases. States like Arkansas add their own laws, mostly about which property you can keep through exemptions.

Bankruptcy Basics

Most people have heard of the automatic stay in bankruptcy, even if they don’t know the term. Section 362 of the Bankruptcy Code stops most creditor actions right away, including:

• Foreclosure
• Creditor harassment
• Eviction
• Wage garnishment
• Repossession

Bankruptcy also wipes out certain unsecured debts. Both ‘discharge’ and ‘unsecured’ have specific meanings in bankruptcy.

“Discharge” means the judge eliminates the legal obligation to repay a debt, but the collateral consequences remain. If you’ve fallen behind on a car loan, a discharge may release you from making additional payments. However, the bank will likely repossess the vehicle.

“Unsecured” means the debtor promised to pay. Examples include school tuition, credit cards, payday loans, and medical bills. Some unsecured debts, mostly back taxes and student loans, are only dischargeable in certain situations. Other unsecured debts, such as criminal court fines, alimony, and child support, are not dischargeable.

Types of Bankruptcy

There are two types of bankruptcy protections for consumers:

• Chapter 7 is designed for people with crippling unsecured debts. Medical bills are the leading cause of Chapter 7 filings in Arkansas. Judges discharge most unsecured debts after a few months in a successful Chapter 7 filing.
• Chapter 13 is designed for people with delinquent secured debts, such as past-due mortgage payments. Chapter 13 gives debtors three to five years to erase their debt through a restructured payment plan. The trustee essentially puts your family on an allowance for that period. Most or all of your disposable monthly income goes to debt retirement.

Am I Eligible for Bankruptcy in Arkansas?

Bankruptcy law can provide an honest but unfortunate debtor with a fresh start. Most people can achieve this through either Chapter 7 or Chapter 13.

Formal Requirements

The means test is the biggest qualification for Chapter 7 debtors. You are eligible to file if your household’s annual income falls below the median for a household of your size in Arkansas. The U.S. Trustee Program publishes this figure twice a year using U.S. Census Bureau data. 

For cases filed between November 1, 2025, and March 31, 2026, Arkansas‘s median family income is as follows:

• One person: $56,923
• Two people: $71,742
• Three people: $80,218
• Four people: $94,566
• Each additional member: add $11,100

These figures are set at the state level, so they don’t adjust for the higher cost of living in cities like Little Rock.

If your income is above the median for your household size, you’re not automatically disqualified. You can still qualify if your disposable income isn’t enough to support a Chapter 13 plan.

Chapter 13 debtors must meet debt-ceiling requirements instead. As of April 1, 2025, these limits apply through March 31, 2028:

• Secured debts: cannot exceed $1,580,125
• Unsecured debts: cannot exceed $526,700

These separate caps replaced a temporary combined limit of $2,750,000 that Congress used between June 2022 and June 2024 to allow more homeowners with large mortgages to qualify for Chapter 13 rather than the more expensive Chapter 11. Once that provision expired, the law reverted to separate secured and unsecured limits, which were then adjusted for inflation to their current amounts.

All filers must meet certain requirements. You usually file in the Arkansas federal district where you have lived most of the last 180 days. To use Arkansas exemptions, you must have lived in the state for at least two years before filing. You also need to complete a debt counseling course before filing and a debt management course after. These classes are short, low-cost, and often available online.

Informal Requirements

Local courts may have extra requirements. An Arkansas bankruptcy attorney can explain the rules in your area.

These qualifications focus on the monthly income and expense schedules included in a bankruptcy petition. Chapter 7 bankruptcy debtors normally must show a marginally positive cash flow. If not, the trustee might scrutinize the paperwork even more closely. Chapter 13 bankruptcy debtors must show substantial disposable income or face having the trustee question their ability to make a monthly debt consolidation payment.

You have a duty to cooperate with the trustee. Some courts are very strict on this point. A judge could dismiss your case because you’re late for a meeting. Other courts may overlook a few late payments, as long as you never go more than about fifteen days delinquent. Try to make your payments on time.

Arkansas Bankruptcy Exemptions

Homes, vehicles, and retirement accounts are often your most valuable assets. If you fall behind on debts, creditors may try to take and sell these items to collect what you owe. Sometimes, they don’t need a court order to do this.

Filing for bankruptcy exempts or protects some of your property. The automatic stay is part of this protection, and some assets are permanently exempt under state or federal law. In general, only luxury items, like private planes and vacation homes, are nonexempt.

Arkansas is one of the few states that allow you to choose between federal and state bankruptcy exemptions. You must pick one or the other. Not everyone who lives in Arkansas can use the state exemptions. You usually must have lived in Arkansas for at least 730 days, or about two years, before filing. If you moved more recently, you can use the exemptions from your previous state. An Arkansas bankruptcy attorney can help you figure out which exemptions apply to your case.

Federal Exemptions

Federal exemptions are in the Bankruptcy Code, Title 11 of the U.S. Code. The dollar amounts are adjusted for inflation every three years, with the current figures applying to cases filed between April 1, 2025, and March 31, 2028. The major exemptions are:

• Homestead exemption: Federal law protects up to $31,575 in home equity for a single filer. Married couples who file jointly and co-own the home can protect double that amount, or $63,150.
• Motor vehicle: The motor vehicle exemption shields up to $5,025 in vehicle equity. You can apply the full amount to a single car or split it across multiple vehicles you own.
• Personal property: Under the personal property exemptions, you can protect appliances, furniture, clothing, and other household goods up to $800 per item, with a total cap of $16,850. Jewelry is protected up to $2,125, tools of the trade up to $3,175, and medical devices are not subject to any dollar limit. The loan value or accrued dividends on a life insurance policy are protected up to $16,850. A few special rules apply to these categories.
• Public benefits: Social Security, VA disability, unemployment, and other public benefits are fully exempt regardless of amount. To preserve this protection, keep these funds in a separate account from your other money, and talk to an attorney before moving anything.
• Retirement accounts: Retirement savings receive some of the strongest protection in the bankruptcy system, though the rules vary by account type. Employer-sponsored plans meeting ERISA’s anti-alienation requirements, including most 401(k)s and pensions, are excluded from your bankruptcy estate entirely with no dollar cap. 529 plans are excluded from your bankruptcy estate rather than exempt, and only if the beneficiary is your child, stepchild, grandchild, or step-grandchild. Timing matters: Contributions made more than 720 days before filing are fully protected; those made between 365 and 720 days before filing are capped; and contributions made within 365 days of filing get no protection at all.
• Wildcard: The wildcard exemption lets you protect up to $1,675 in any property you want, plus up to an additional $15,800 of any unused portion of your homestead exemption. This second component is especially useful if you rent or otherwise do not need your full homestead exemption.

Keep in mind that an item’s bankruptcy value is not the same as its fair market value. You must list the items’ as-is cash value on Schedule A or Schedule B.

If you haven’t owned your home for at least 1,215 days (about 40 months) before filing, federal law caps the home equity you can protect at $214,000, even under Arkansas‘s unlimited homestead exemption. Lawmakers built this rule to stop people from moving to a generous-exemption state shortly before filing just to shield their home equity.

State Exemptions

Arkansas state exemptions are also available. Unlike the federal figures above, Arkansas sets its exemption amounts by statute and the state constitution rather than automatically adjusting them for inflation, so they can remain unchanged for years. These exemptions protect the following:

• Homestead: Unlimited value for a married person or head of family, on up to 1/4 acre in a city, town, or village, or up to 80 acres elsewhere (extends to one acre [urban] or 160 acres [rural] if the extra acreage is worth $2,500 or less
• Wages: The most recent 60 days of earned but unpaid wages, though never less than $25 per week
• Vehicle: Debtor’s interest not exceeding $1,200 in one motor vehicle
• Personal property and wildcard: $200 in any property of your choosing for a single filer, or $500 if you are married or the head of a family (Arkansas does not separate a “personal property“ exemption from a “wildcard” exemption)
• Tools of the trade: $750 tools of the trade exemption
• Wedding rings: Fully exempt, including mounted diamonds up to half a carat in total weight
• Life insurance: Cash value or proceeds paid to the insured are subject to the same $200/$500 personal property cap, while those paid to a different beneficiary can be exempt with no dollar cap
• Government benefits: Unlimited
• Retirement accounts: IRA deposits made more than a year before filing are exempt up to the $20,000 IRA exemption (many employer-sponsored retirement plans receive broader, separate protection)

Some exemption amounts are higher if you are married and file jointly. An attorney can help you maximize your exemptions, including strategies such as placing certain assets in a trust.

Connect With a Dedicated Attorney

If you’re looking for a fresh start and want to protect your property, reach out to an Arkansas bankruptcy attorney. They can explain your options and help you keep as much of your property as possible.