- In Chapter 7, the bankruptcy court can seize your assets and cash to pay your creditors, but Arkansas law exempts some assets. The amounts adjust over time; in 2011, for example, the law exempts $800 of equity in your house or burial plot, or $1,250 if you're married; wedding rings, as long as the diamond is under a half-carat; and "tools of the trade" used by you or one of your dependents for work, up to a value of $750.
- If the value of your house is less than or roughly equal to the mortgage debt plus the exemption, it can't be sold, as there wouldn't be any money left over for your creditors. The same applies to any other assets or property -- if their value is under the amount exempted in state law, you need not worry about sale. Arkansas also allows you to choose the federal list of exemptions, but it has to be all one list or the other, not mix-and-match.
- If you own land in any county in Arkansas, you must notify the county recorder of deeds that you've entered bankruptcy. The recorder will place certified copies of the notification and bankruptcy information in the county files, where they'll become part of the public record. In Chapter 7, your assets become part of the "bankruptcy estate" controlled by a court trustee. The county record will name the trustee, who will be responsible for conveying title if the land is sold.
- To file Chapter 7 bankruptcy in Arkansas, your average income for the six months before you file must be below the state median for a family of your size. If it's higher, you can try taking a means test that adjusts your income for living expenses in your part of the state. You file your bankruptcy paperwork and financial information at whichever of Arkansas' two federal bankruptcy courts -- in Fayetteville or Little Rock -- covers your district.
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