By Michael L. Moskowitz and Melissa A. Guseynov

In a decision of first impression out of the Bankruptcy Court for the District of Arizona, Judge Daniel P. Collins, U.S.B.J., held that pet insurance proceeds are exempt under Arizona law and the exemption is not limited to a debtor’s claimed value of their pet. In re Hill, 18-07595 (Bankr. D. Ariz. Nov. 15, 2018).

In Hill, the chapter 7 debtor owned a dog and two cats. She listed the pets in her schedules with a collective value of $100 and claimed them as exempt. Judge Collins found that “the cats are worthless and the dog alone has monetary value.” Debtor also owned a pet insurance policy, which she listed as exempt, initially with a value of zero.

Approximately two weeks before bankruptcy, Scout, debtor’s dog, “sustained internal damage, apparently from something he ate.” Scout required surgery, which was paid for by a friend of debtor. Subsequent to filing her petition for bankruptcy relief, the pet insurance policy paid 90% of the cost of the surgery. Debtor promptly used the insurance proceeds to reimburse her friend who advanced the money for the surgery. Debtor claimed an exemption in the pet insurance proceeds. Trustee objected to the extent the insurance proceeds exceeded Scout’s scheduled value.

In reviewing and applying the Arizona exemption statutes, Judge Collins found no ambiguity that Scout constituted exempt property. Next, the Court analyzed whether debtor could exempt insurance proceeds for more than Scout’s value. Notably, Judge Collins explained that while “most rational consumers would never spend more to repair property than such property is worth, expenditures on dogs often bear no relation to the economic value of one’s beloved canine family member.”

Judge Collins further explained that when a child goes to college, “it is the family dog that is missed far more than the parents who are picking up a six-figure tab for that student’s education.” In conclusion, the Court held that debtor’s reimbursing her friend with the pet insurance proceeds did not cause the proceeds to lose their exempt status. Thus, debtor “was free to use the funds as she pleased.”

In most cases, owning a pet and filing for bankruptcy protection is a non-issue. However, as this case demonstrates, the receipt of pet insurance proceeds post-petition can create several issues and generate (likely unwanted) attention from the trustee. The attorneys at Weltman & Moskowitz help their clients make informed decisions every day to avoid costly mistakes. Feel free to reach out to our attorneys with your bankruptcy questions.

Richard Weltman & Michael Moskowitz |

About Weltman & Moskowitz, LLP, A New York and New Jersey Business, Bankruptcy, and Creditors’ Rights Law Firm:

Founded in 1987, Weltman & Moskowitz, LLP is a highly regarded business law firm concentrating on creditors’ rights, bankruptcy, foreclosure, and business litigation. Michael L. Moskowitz, a partner with the firm, focuses his practice on business and bankruptcy litigation, as well as creditor’s rights, foreclosure, adversary proceeding litigation, corporate counseling, M&A, and transactional matters. Michael can be reached at (212) 684-7800, (201) 794-7500 or Melissa Guseynov is an associate of the firm. Melissa can be reached at