Arkansas Bankruptcies: How Chapter 7 and 13 Work

An Arkansas bankruptcy case runs through federal court under either Chapter 7 or Chapter 13, but Arkansas law decides much of what property you keep. Chapter 7 wipes out most unsecured debt in about four to six months by letting a trustee sell your non-exempt property. Chapter 13 lets you keep everything and repay some portion of what you owe through a three- to five-year plan funded by your income. Which one fits depends on your income, what you own, and whether you’re trying to catch up on a secured debt like a mortgage.

Chapter 7 or Chapter 13

Chapter 7 is a liquidation. A court-appointed trustee gathers any property that isn’t protected by an exemption, sells it, and pays creditors from the proceeds. In return, most remaining unsecured debts (credit cards, medical bills, personal loans) are discharged. Cases usually close within four to six months.¹

Chapter 13 works on a different premise. You keep your property, including non-exempt assets, and commit your disposable income to a three- to five-year repayment plan. The appeal is practical: if you’re behind on a house payment or a car loan and want to keep the collateral, Chapter 13 lets you cure the arrears over time while the automatic stay holds off foreclosure or repossession. You need steady income to qualify.¹

Qualifying for Chapter 7: The Means Test

Federal law requires individual Chapter 7 filers to pass a means test. The first step compares your average monthly income over the six months before filing to the Arkansas median income for a household your size. For cases filed between November 2025 and March 2026, the Arkansas figures are:

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

Fall below the median and you pass. Earn above it and you aren’t automatically out; the test’s second step deducts allowed expenses from your income to produce a disposable-income figure. If that number is low enough, you still qualify. If it isn’t, the test effectively routes you to Chapter 13, where disposable income funds the repayment plan.²

What You Keep: Arkansas or Federal Exemptions

Exemptions decide what property is protected from the trustee in Chapter 7 and what the floor is for unsecured creditors in Chapter 13. Arkansas is a choice state: you can elect either the Arkansas exemption list or the federal bankruptcy exemptions under 11 U.S.C. § 522(d). You pick one list; you cannot combine them. Married couples filing jointly can each claim a full set.

You must have been domiciled in Arkansas for 730 days (two years) before filing to use the Arkansas list. Recent arrivals may have to use their previous state’s exemptions or fall back on the federal list.³

The Arkansas Homestead

Arkansas’s homestead exemption has no dollar cap, which is unusual. Protection covers a home on up to one-quarter acre in a city or up to 80 acres rural with unlimited value. Larger parcels (up to one acre urban, 160 acres rural) are also covered, but value above the smaller thresholds is capped at $2,500.⁴

The important limit: the Arkansas homestead is only available to a filer who is married or the head of a family. A single filer who isn’t a head of household gets far less protection for a residence under the state list, which is often why those filers choose federal exemptions instead.⁵

A separate federal cap applies if you acquired your homestead interest within 1,215 days (about three years and four months) before filing, regardless of what the state exemption would otherwise allow.³

Personal Property Under Arkansas Exemptions

Away from the home, Arkansas protections are thin:

Motor vehicle: up to $1,200 in equity in one vehicle.
Personal property for a married filer or head of family: up to $500 in value, plus all wearing apparel.
Personal property for a single filer who isn’t a head of family: up to $200, plus wearing apparel.
Tools of the trade: up to $750 in professional books, tools, or implements.
Wedding bands at full value, including mounted diamonds up to one-half carat.
Sixty days of earned but unpaid wages.

Some assets are protected either way. Most qualified retirement accounts (401(k)s and IRAs), proceeds from life, health, accident, and disability insurance, workers’ compensation benefits, unemployment benefits, and public welfare assistance are shielded regardless of which list you choose. For IRAs, the contributions must have been made more than a year before filing.⁴

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

How Filing Works in Arkansas

Cases are filed in the United States Bankruptcy Court for the Eastern or Western District of Arkansas. Which district you use depends on where you live or where your main assets sit.⁶

Before filing, you must complete a credit counseling course through a U.S. Trustee-approved agency within the 180 days before your filing date. Skipping it is grounds for dismissal. After filing, and before the court will issue your discharge, you must complete a second course on personal financial management. Both are available online and generally cost between $10 and $50 each.⁷⁸

Court filing fees for 2026 are $338 for Chapter 7 and $313 for Chapter 13. Chapter 7 filers who can’t afford the fee can request installment payments or, if household income is under 150% of the federal poverty guidelines, apply for a full waiver. Chapter 13 filers can pay in installments but can’t get a waiver.⁹ Attorney fees for consumer cases generally run $1,500 to $3,500 for a straightforward Chapter 7 and more for Chapter 13, depending on the complexity of your finances and your location.

After filing, you’ll attend a meeting of creditors, known as a 341 meeting after the code section that requires it. Chapter 7 meetings are set 21 to 40 days after filing; Chapter 13 meetings 21 to 50 days. No judge attends. The trustee swears you in and asks about your assets, debts, and the accuracy of your paperwork. Creditors may attend but rarely do. Most meetings run under 10 minutes when documents are in order.¹⁰ A Chapter 7 discharge typically arrives about 60 days after the 341 meeting. A Chapter 13 discharge comes at the end of the three- to five-year plan.

The Automatic Stay

The moment the petition is filed, an automatic stay stops most collection activity: lawsuits, wage garnishments, foreclosures, repossessions, and creditor calls on pre-filing debts.¹¹

The stay narrows for repeat filers. If you had a bankruptcy dismissed within the past year, the stay in your new case expires after 30 days unless a court extends it. If two or more cases were dismissed within the past year, no stay takes effect at all. In both scenarios, bad faith is presumed, and you’d have to overcome that presumption with clear and convincing evidence.¹¹

Keeping a Car or Other Secured Property in Chapter 7

If you want to keep collateral that secures a debt, like a financed vehicle, you can sign a reaffirmation agreement. You agree to stay personally liable on the loan despite the discharge; the lender keeps its lien and you keep paying. The agreement must be filed within 60 days after the first date set for the 341 meeting.

Reaffirming carries real risk. Fall behind later and the lender can repossess the collateral and still pursue you for the balance, exactly as if you had never filed. You can rescind the agreement before your discharge or within 60 days after the agreement is filed, whichever is later.¹²

Debts That Survive Bankruptcy

Not everything gets wiped out. Categories that typically survive include:

Child support and alimony, and other domestic support obligations.
Most recent income taxes, taxes where no return was filed, and taxes involving fraud or evasion.
Student loans and educational benefit overpayments, unless you prove undue hardship (a standard that remains hard to meet).
Debts for money obtained by fraud or false financial statements.
Debts for death or personal injury caused by operating a vehicle while intoxicated.
Debts for willful and malicious injury to a person or property.
Criminal fines and most government-imposed penalties.
Debts you failed to list, unless the creditor had actual knowledge of your case.

Two timing rules also apply. 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. Those thresholds were last adjusted in April 2025.¹³

Credit Impact and Waiting Periods

A bankruptcy can stay on your credit report for up to 10 years from the filing date under the Fair Credit Reporting Act. In practice, the major bureaus typically remove a completed Chapter 13 after seven years and keep Chapter 7 for the full ten.¹⁴ The score hit is sharpest at filing and softens with time. Many filers see credit card offers (at high rates) within a year of discharge, and reaching a reasonable score in two to three years is realistic with on-time payments and careful use of secured credit.

Federal law also limits how often you can get a discharge. After a Chapter 7 discharge, you have to wait eight years to file another Chapter 7. After a Chapter 13 discharge, the wait for a new Chapter 7 is six years unless your Chapter 13 plan paid unsecured creditors in full, or paid at least 70% and was proposed in good faith. A Chapter 13 following a prior Chapter 7 discharge is possible on a shorter timeline, though the cases need careful spacing to avoid the repeat-filer limits on the automatic stay.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 US Code 341 – Meetings of Creditors and Equity Security Holders
11
Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
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