Bankruptcy can be a daunting and overwhelming process for anyone. If you are considering filing for bankruptcy in Arizona, it is important to understand the laws and procedures that govern the process. This comprehensive guide will provide you with all the information you need to know about filing for bankruptcy in Arizona, including the types of bankruptcy, eligibility requirements, the bankruptcy process, and the consequences of filing for bankruptcy.
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Types of Bankruptcy
There are two main types of filing bankruptcy that individuals can file for in Arizona: Chapter 7 and Chapter 13:
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is the most common type of bankruptcy filed in Arizona. It is designed for individuals who cannot pay their debts and need a fresh start. In Chapter 7 bankruptcy, your non-exempt assets are sold to pay off your debts, and any remaining debt is discharged.
To qualify for Chapter 7 bankruptcy in Arizona, you must pass the means test. The means test compares your income to the median income in Arizona for a household of your size. If your income is below the median, you are eligible for Chapter 7 bankruptcy. If your income is above the median, you may still be eligible for Chapter 7 bankruptcy if you pass a second means test that takes into account your expenses and other factors.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as reorganization bankruptcy, is designed for individuals who have a regular income and want to repay their debts over time. In Chapter 13 bankruptcy, you create a repayment plan that lasts three to five years, and your debts are discharged at the end of the repayment period.
To qualify for Chapter 13 bankruptcy in Arizona, you must have a regular income and your unsecured debts must be less than $394,725 and your secured debts must be less than $1,184,200.
Eligibility Requirements
To file for bankruptcy in Arizona, you must meet certain eligibility requirements:
- Residency Requirement: You must be a resident of Arizona for at least 91 days before filing for bankruptcy in the state.
- Credit Counseling Requirement: Before filing for bankruptcy in Arizona, you must complete a credit counseling course from an approved provider. The course must be completed within 180 days before filing for bankruptcy.
- Means Test: As mentioned earlier, you must pass the means test to qualify for Chapter 7 bankruptcy in Arizona. The means test compares your income to the median income in Arizona for a household of your size. If your income is below the median, you are eligible for Chapter 7 bankruptcy.
The Filing Bankruptcy Process
The bankruptcy process in Arizona can be complex, but it can be broken down into several steps.
Credit Counseling
Before filing for bankruptcy in Arizona, you must complete a credit counseling course from an approved provider. The course must be completed within 180 days before filing for bankruptcy.
Filing Your Bankruptcy Petition
To file for bankruptcy in Arizona, you must file a bankruptcy petition with the bankruptcy court. The petition requires you to provide detailed information about your debts, assets, income, and expenses.
Automatic Stay
Once you file for bankruptcy in Arizona, an automatic stay goes into effect. The automatic stay stops all collection actions against you, including wage garnishments, foreclosure proceedings, and creditor harassment.
Meeting of Creditors
About four to six weeks after filing your bankruptcy petition, you will attend a meeting of creditors. At this meeting, you will be asked questions about your financial situation by the bankruptcy trustee and your creditors.
Asset Liquidation
If you file for Chapter 7 bankruptcy, your non-exempt assets will be sold to pay off your debts. If you file for Chapter 13 bankruptcy, you will create a repayment plan that lasts three to five years, and your debts will be discharged at the end of the repayment period.
Debt Discharge
Once you have completed the bankruptcy process, your debts will be discharged. This means that you are no longer legally obligated to pay them back.
The Consequences of Filing for Bankruptcy
Filing for bankruptcy in Arizona can have both positive and negative consequences.
Positive Consequences
- Automatic Stay: Filing for bankruptcy in Arizona triggers an automatic stay that stops all collection actions against you, including wage garnishments, foreclosure proceedings, and creditor harassment.
- Debt Discharge: Once you have completed the bankruptcy process, your debts will be discharged, meaning you are no longer legally obligated to pay them back.
- Fresh Start: Filing for bankruptcy in Arizona provides you with a fresh start and the opportunity to rebuild your credit.
Negative Consequences
- Credit Score: Filing for bankruptcy in Arizona can significantly impact your credit score. A bankruptcy filing can stay on your credit report for up to 10 years.
- Difficulty Obtaining Credit: After filing for bankruptcy in Arizona, it may be difficult to obtain credit, and if you do, it may come with high-interest rates and fees.
- Loss of Property: If you file for Chapter 7 bankruptcy, your non-exempt assets will be sold to pay off your debts.
Conclusion
Filing for bankruptcy in Arizona can be a difficult decision, but it can provide you with a fresh start and the opportunity to rebuild your credit. It is important to understand the types of bankruptcy, eligibility requirements, the bankruptcy process, and the consequences of filing for bankruptcy. If you are considering filing for bankruptcy in Arizona, it is recommended that you consult with a bankruptcy attorney to discuss your options and ensure that you are making the best decision for your financial situation.
Frequently Asked Questions
What is bankruptcy and how does it work?
Bankruptcy is a legal process that allows individuals or businesses to discharge or restructure their debts. The process starts with filing a petition in court, and then a trustee is appointed to oversee the case. The trustee will review the debtor’s assets and liabilities, and determine how to best distribute the assets to creditors.
What types of bankruptcy are available in Arizona?
There are two main types of bankruptcy available in Arizona: Chapter 7 and Chapter 13. Chapter 7 is a liquidation bankruptcy that allows individuals to discharge most of their debts. Chapter 13 is a reorganization bankruptcy that allows individuals to repay their debts over a period of three to five years.
What are the eligibility requirements for filing for bankruptcy in Arizona?
To file for bankruptcy in Arizona, you must be a resident of the state or have a business located in Arizona. You must also pass a means test, which compares your income to the median income in Arizona to determine if you qualify for Chapter 7.
What debts can be discharged in bankruptcy?
Most unsecured debts can be discharged in bankruptcy, including credit card debt, medical bills, and personal loans. However, certain debts, such as student loans and tax debts, are generally not dischargeable.
Will filing for bankruptcy affect my credit score?
Yes, filing for bankruptcy will have a negative impact on your credit score. However, if you have a lot of debt and are struggling to make payments, your credit score is likely already suffering.
How long does the bankruptcy process take?
The length of the bankruptcy process depends on the type of bankruptcy you file for and the complexity of your case. Chapter 7 cases typically take around four to six months to complete, while Chapter 13 cases can take three to five years.
What happens to my assets in bankruptcy?
In Chapter 7 bankruptcy, some of your assets may be sold to pay off your debts. However, many assets are exempt from sale, such as your home, car, and personal belongings. In Chapter 13 bankruptcy, you keep your assets but must repay your debts through a court-approved payment plan.
Can I file for bankruptcy if I have a job?
Yes, you can file for bankruptcy even if you have a job. However, your income will be taken into account when determining your eligibility for Chapter 7 bankruptcy and the terms of your payment plan in Chapter 13 bankruptcy.
Can I file for bankruptcy more than once?
Yes, you can file for bankruptcy more than once. However, there are certain restrictions on when and how often you can file, depending on the type of bankruptcy you previously filed for and the outcome of your case.
Do I need an experienced bankruptcy attorney?
While it is possible to file for bankruptcy without an attorney, it is not recommended. The bankruptcy process can be complex, and an experienced attorney can help ensure that your case is handled properly and that you receive the best possible outcome.
Glossary
- Bankruptcy: A legal process in which a person or business declares themselves unable to pay their debts and seeks relief from their creditors.
- Chapter 7 bankruptcy: A type of bankruptcy in which a debtor’s assets are liquidated to pay off creditors.
- Chapter 13 bankruptcy: A type of bankruptcy in which a debtor sets up a repayment plan to pay off their debts over a period of three to five years.
- Creditors: Individuals or businesses to whom a debtor owes money.
- Debtor: An individual or business that owes money to creditors.
- Discharge: The release of a debtor from all remaining debts after they have completed the bankruptcy process.
- Exempt property: Property that a debtor is allowed to keep during bankruptcy proceedings.
- Filing for bankruptcy: The process of officially submitting a request for bankruptcy to the court.
- Liquidation: The process of selling a debtor’s assets to pay off creditors.
- Means test: A calculation used to determine whether a debtor qualifies for Chapter 7 bankruptcy.
- Non-exempt property: Property that a debtor is not allowed to keep during bankruptcy proceedings.
- Petition: The legal document filed with the court to begin the bankruptcy process.
- Repayment plan: A plan set up by a debtor to pay off their debts over a period of time under Chapter 13 bankruptcy.
- Secured debt: A debt that is backed by collateral, such as a house or car.
- Trustee: A court-appointed individual who oversees the bankruptcy process and ensures that creditors are paid as much as possible.
- Unsecured debt: A debt that is not backed by collateral, such as credit card or medical debt.
- Wage garnishment: A court-ordered process in which a debtor’s wages are withheld to pay off creditors.
- Bankruptcy discharge: The official release of a debtor from all remaining debts after they have completed the bankruptcy process.
- Bankruptcy exemptions: Property that a debtor is allowed to keep during bankruptcy proceedings.
- Bankruptcy trustee: A court-appointed individual who oversees the bankruptcy process and ensures that creditors are paid as much as possible.
- Arizona bankruptcy court: The Arizona bankruptcy court is a legal entity that oversees bankruptcy cases filed in Arizona, providing bankruptcy relief to individuals and businesses in financial distress.
- Federal bankruptcy court: A federal court that handles cases related to bankruptcy, including debt relief, reorganization, and liquidation of assets.
