Arkansas Bankruptcies: Chapter 7 or 13, Exemptions, and Costs

Filing for bankruptcy in Arkansas means using the federal bankruptcy courts under Title 11 of the U.S. Code, but Arkansas law decides much of what property you get to keep. Most individuals file under either Chapter 7 (a liquidation that wipes out most unsecured debt in a few months) or Chapter 13 (a three-to-five-year repayment plan that lets you keep property and catch up on missed payments). Which one fits depends on your income, what you own, and whether you’re trying to save a house or car from foreclosure or repossession.

Chapter 7 or Chapter 13

Chapter 7 is a liquidation. A court-appointed trustee gathers your non-exempt property, sells it, and pays creditors from the proceeds. In exchange, most remaining unsecured debts are discharged. The case usually closes in four to six months.¹

Chapter 13 is a reorganization. You keep your property and repay some or all of your debts through a plan that runs three to five years. You need steady income to fund it. The tradeoff is real: Chapter 13 lets you cure a mortgage arrearage or catch up on a car loan over time while holding onto the property, which is why people facing foreclosure often file under this chapter rather than Chapter 7.¹

Who Qualifies for Chapter 7 in Arkansas

Not every filer qualifies for Chapter 7. Federal law requires individuals to pass a means test that compares average monthly income over the six months before filing against the median income for an Arkansas household of the same size.²

For cases filed between November 2025 and March 2026, the Arkansas median income figures are:

Single filer: $56,923
Two-person household: $71,742
Three-person household: $80,218
Four-person household: $94,566

Income below the median means you pass. Income above it doesn’t end things automatically. The second part of the test subtracts allowed expenses from your income, and if disposable income is low enough, you still qualify. If it isn’t, the test effectively steers you into Chapter 13, where that disposable income funds a repayment plan.²

What Property You Get to Keep

Exemptions decide what stays out of the trustee’s reach in Chapter 7 and set the floor for what unsecured creditors must be paid under a Chapter 13 plan. Arkansas is one of the states that lets filers choose between the state’s own exemption list and the federal bankruptcy exemptions under 11 U.S.C. § 522(d). You cannot mix and match; you pick one list and use it.

Which list serves you better depends on your assets. Arkansas exemptions protect homesteads generously, but only for filers who are married or the head of a family. Federal exemptions offer broader personal property coverage and a useful wildcard exemption that helps filers who don’t own a home.

There is a residency rule that applies either way. To use Arkansas exemptions, you must have been domiciled in the state for at least 730 days (two years) before filing. Recent movers may need to use their prior state’s exemptions or, if that leaves them ineligible for any state’s list, the federal exemptions.³

The Arkansas Homestead Exemption

Arkansas protects a homestead with no dollar cap on value, subject to acreage limits. Urban homesteads are protected on up to one-quarter acre with unlimited value. Rural homesteads are protected on up to 80 acres with unlimited value. The exemption extends to larger properties (up to one acre urban, 160 acres rural), but a $2,500 value cap applies to acreage above those minimum thresholds.⁴

The catch: the Arkansas homestead exemption is available only to filers who are married or the head of a family. A single filer who is not the head of a household gets far less residential protection under the state list, which is often why single homeowners choose federal exemptions instead.⁵

A federal cap can also override the state figure if you acquired your homestead interest within 1,215 days (roughly three years and four months) before filing.³

Personal Property Under the Arkansas List

Outside the home, Arkansas exemptions are thin. The main ones under the state list:

Motor vehicle: up to $1,200 in equity in one vehicle.
Personal property, married or head of family: up to $500 in value, plus all wearing apparel.
Personal property, single and not head of family: up to $200 in value, plus wearing apparel.
Tools of the trade: up to $750 in professional books, tools, or implements.
Wedding bands: full value, including mounted diamonds up to one-half carat.
Wages: 60 days of earned but unpaid wages.

Married couples filing jointly can each claim a full set of exemptions, doubling the protected amounts on shared property.⁴

Some assets are protected under both state and federal law regardless of which list you choose: qualified retirement accounts such as 401(k)s and IRAs (IRA contributions must have been made more than a year before filing), proceeds from life, health, accident, and disability insurance, workers’ compensation, unemployment benefits, and public assistance.⁴

Property value above your chosen exemption limits is non-exempt. In Chapter 7, the trustee can sell that excess. In Chapter 13, you keep the property, but your plan must pay unsecured creditors at least what they would have received in a Chapter 7 liquidation.

How Filing Works and What It Costs

Arkansas cases are filed with the United States Bankruptcy Court for the Eastern and Western Districts of Arkansas. The division you use depends on where you live or where your principal assets sit.⁶

Before filing, federal law requires you to complete a credit counseling course through a U.S. Trustee-approved agency within the 180 days before your petition. Skipping it can get the case dismissed. A second course, called debtor education, is required after filing but before discharge. Both are available online and generally cost $10 to $50.⁷⁸

Federal court filing fees for 2026 are $338 for Chapter 7 (a $245 filing fee, $78 administrative fee, and $15 trustee surcharge) and $313 for Chapter 13 ($235 filing fee and $78 administrative fee).⁹ Chapter 7 filers who cannot pay can request installments or, with household income below 150% of the federal poverty guidelines, apply for a full fee waiver. Chapter 13 filers can pay in installments but do not qualify for a waiver. Attorney fees generally run $1,500 to $3,500 for a straightforward Chapter 7 and more for Chapter 13, varying with case complexity and location within the state.

Once your petition is filed, an automatic stay takes effect immediately and stops most collection activity, including lawsuits, wage garnishments, foreclosures, repossessions, and creditor calls.¹⁰ Within 21 to 40 days of filing (21 to 50 for Chapter 13), you attend a meeting of creditors, known as a 341 meeting, where the trustee questions you under oath about your finances. No judge attends, and most 341 meetings last under 10 minutes when the paperwork is in order.¹¹ A Chapter 7 discharge typically comes about 60 days after the 341 meeting. A Chapter 13 discharge comes at the end of the repayment plan.

If you want to keep financed property such as a car in Chapter 7, you may need to sign a reaffirmation agreement, which keeps you personally liable for the debt after discharge in exchange for keeping the collateral. Reaffirmation carries real risk: if you fall behind later, the lender can repossess and pursue you for any deficiency as if the bankruptcy had never happened.¹²

Debts Bankruptcy Won’t Erase

Filing wipes out many debts but leaves certain categories fully enforceable. The major non-dischargeable debts are:

Child support and alimony, and other domestic support obligations.
Most taxes, including recent income taxes, taxes on unfiled returns, and taxes involving fraud or evasion.
Student loans and educational benefit overpayments, unless you can prove undue hardship, a standard that remains difficult to meet.
Debts obtained through fraud or false financial statements.
Debts for death or personal injury caused by driving while intoxicated.
Debts from willful and malicious injury to a person or property.
Criminal fines and most government-imposed penalties.
Debts left off your bankruptcy paperwork, unless the creditor had actual knowledge of the case.

Two presumptions also apply to last-minute borrowing. Luxury purchases totaling more than $900 from a single creditor within 90 days before filing are presumed non-dischargeable, as are cash advances totaling more than $1,250 taken within 70 days before filing. These thresholds were last adjusted in April 2025.¹³

Credit Reporting and How Soon You Can File Again

A bankruptcy filing stays on your credit report for up to 10 years from the filing date under the Fair Credit Reporting Act. In practice, the three major credit bureaus usually remove a completed Chapter 13 case after seven years, while a Chapter 7 remains for the full ten.¹⁴ The score hit is steepest right after filing and softens over time. Many people receive credit offers, at higher rates, within a year of discharge, and rebuilding to a reasonable score in two to three years is realistic with on-time payments and responsible use of secured credit.

Federal law limits how often you can receive a discharge. After a Chapter 7 discharge, you must wait eight years before filing another Chapter 7. After a Chapter 13 discharge, the wait for a new Chapter 7 is six years, unless the Chapter 13 plan paid unsecured creditors in full or paid at least 70% and was proposed in good faith. Filing Chapter 13 after a Chapter 7 discharge is possible on a shorter timeline, though the cases have to be spaced carefully because of automatic stay rules that apply to repeat filers.¹⁵

1
United States Courts. Chapter 7 Bankruptcy Basics
2
U.S. Trustee Program. Census Bureau Median Family Income By Family Size
3
Office of the Law Revision Counsel. 11 US Code 522 – Exemptions
4
Justia Law. Arkansas Code 16-66-218 – Exemptions from Execution Under Federal Bankruptcy Proceedings
5
Justia Law. Arkansas Constitution Article 9 – Exemption – Section 3
6
United States Bankruptcy Court for the Eastern and Western Districts of Arkansas. United States Bankruptcy Court for the Eastern and Western Districts of Arkansas
7
United States Department of Justice. Credit Counseling and Debtor Education Information
8
United States Courts. Credit Counseling and Debtor Education Courses
9
United States Courts. Bankruptcy Court Miscellaneous Fee Schedule
10
Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
11
Office of the Law Revision Counsel. 11 US Code 341 – Meetings of Creditors and Equity Security Holders
12
Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge
13
Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge
14
Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports
15
Office of the Law Revision Counsel. 11 USC 727 – Discharge