The Arizona Supreme Court recently held an RV is not an exempt homestead protected in bankruptcy proceedings. The ruling has implications for individuals who reside in their RVs and seek bankruptcy protection.
Background
The case involved Steven and Mary Drummond, who lived in their 2017 Tiffin Allegro motorhome. When they filed Chapter 7, they claimed that their motorhome qualified as an exempt homestead under Arizona law. However, the bankruptcy trustee objected, arguing that the motorhome did not meet the legal definition of a mobile home.
The Court’s Decision
The Arizona Supreme Court held that a motorhome does not qualify for the homestead exemption under A.R.S. § 33-1101(A)(3). This was contrary to many previous court opinions holding that motorhomes qualified as an exempt homestead protected in bankruptcy proceedings. However, the AZ Supreme Court overturned such long-term precedent. It noted that the Arizona statute includes the term “mobile home” to qualify as a homestead. The Court held that that the legislature intended that the dwelling must not be moveable to constitute an exempt homestead. In contrast, a “motorhome” is readily movable and not anchored to land, making it ineligible for the homestead exemption.
Implications
This ruling has significant implications for individuals who live in RVs and seek bankruptcy protection. While traditional mobile homes are exempt, an RV is not an exempt homestead. Therefore, debtors residing in motorhomes cannot claim the homestead exemption to protect their RVs from creditors during bankruptcy proceedings. As such, if you have a motorhome with equity, you will lose it if you file Chapter 7 bankruptcy.
Practical Considerations
If you live in an RV and are considering bankruptcy, you must understand the distinction between mobile homes and motorhomes. It may be better to file Chapter 13 instead of Chapter 7 if your RV has equity. Chapter 13 might allow you to keep your RV if you pay enough as part of your Chapter 13 plan. Consult with a qualified bankruptcy attorney to explore your options based on your specific circumstances.
Remember that bankruptcy laws can vary by state, so seeking legal advice tailored to Arizona law is crucial. Protecting your assets and understanding your rights under the homestead exemption is essential for a successful bankruptcy process.
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