Filing for Bankruptcy in Arizona

In most respects, filing for bankruptcy in Arizona isn’t any different than filing in another state. The bankruptcy process falls under federal law in Arizona.

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Facing financial challenges is a part of life. But if you're one of the millions struggling financially due to a job loss, illness, or another event in Arizona, bankruptcy can help. Here, you'll find an explanation of Chapters 7 and 13, checklists to help you understand the process and stay organized, and Arizona's property exemption laws and filing information.

However, we couldn't squeeze everything into this article, so be sure to check out its companion, What You Need to Know to File for Bankruptcy—you'll find lots more details there.



How Bankruptcy Works in Arizona

In most respects, filing for bankruptcy in Arizona isn't any different than filing in another state. The bankruptcy process falls under federal law, not Arizona state law, and it works by unwinding the contracts between you and your creditors—that's what gives you a fresh start.

But Arizona's laws come into play, too, in a significant way. They determine the property you can keep in your bankruptcy case. You'll also need to know other filing information, which we explain after going over some basics.

Choosing the Right Bankruptcy Chapter For You in Arizona

Most people file either Chapter 7 or Chapter 13. If you don't know the differences between the two, you're not alone. The short explanation below and our handy Chapter 7 versus 13 chart will help clarify things.

Filing for Chapter 7 Bankruptcy in Arizona

Chapter 7 bankruptcy is often a bankruptcy filer's first choice for several reasons. It's quick—it only takes a few months to complete. And it's cheap—you don't pay anything to creditors. It works well for those of us whose property consists of the essential items needed to live and work.

However, people with more assets could lose them, especially if they own unnecessary luxury items. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamas, even your house or vehicle if you have too much equity or are behind on the payments. Unlike Chapter 13, Chapter 7 doesn't have a payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you're behind when you file.

Filing for Chapter 13 Bankruptcy in Arizona

Chapter 13 bankruptcy filers must pay creditors some or all of what they owe using a three- to five-year repayment plan. But the payment plan allows Chapter 13 to offer benefits not available in Chapter 7. For instance, not only do you keep all of your property, but you can save your home from foreclosure or your car from repossession. If you need time to repay a debt you can't discharge in bankruptcy, you can use this chapter to force a creditor into a payment plan.

The biggest downside to this chapter? It can be expensive, and many people can't afford the monthly payment. Learn more about when filing for Chapter 13 is better than Chapter 7. Also, businesses can't file a Chapter 13 case. If you're a business owner, you'll want to learn about the ins and outs of small business bankruptcies.

Will Filing Bankruptcy in Arizona Erase My Debts?

Bankruptcy wipes out many bills, like credit card balances, overdue utility payments, medical bills, personal loans, and more. You can even get rid of a mortgage or car payment if you're willing to give up the house or car that secures the debt. (Putting property up as collateral creates a "secured debt"—if you don't pay what you owe, the lender gets to take the property back.)

But you can't discharge all debts. Nondischargeable debts, like domestic support arrearages and recent tax debt, won't go away in bankruptcy, and student loans aren't easy to wipe out (you'd have to win a separate lawsuit). You'll want to be sure that bankruptcy will discharge (get rid of) enough bills to make it worthwhile.

Steps in an Arizona Bankruptcy

We all know that seeing the forest helps us recognize the trees, so it's probably a good time to consider the significant steps you'll take during your bankruptcy journey. Think of this checklist as a roadmap, but you can also use it to track your progress. The good news? You've already made headway on the first two items!

Bankruptcy Steps Checklist

Keeping Property When Filing Bankruptcy in Arizona

Exemptions change periodically, and these figures could change before we update them again in June 2023. You can meet with a bankruptcy attorney for current amounts and learn how they apply to your situation.

You won't lose everything in bankruptcy. You'll use your state bankruptcy exemption laws to protect your property. We list the significant exemptions below, but understanding the following will help you maximize what you'll keep in your case.

  • Exempt and nonexempt property. You can keep property protected by an exemption or "exempt" property. When a bankruptcy exemption doesn't cover the property, you'll either lose it in Chapter 7 or have to pay for it in the Chapter 13 repayment plan.
  • Choosing state or federal exemptions. You can choose whether you use the state exemption list or the list of federal bankruptcy exemptions, but you can't mix and match exemptions from both sets. Filers who use state exemptions can also use the federal nonbankruptcy exemptions.
  • Doubling exemptions. Spouses filing together can double the exemption amount if both own the property.
  • Retirement accounts all filers can protect. You can keep your tax-exempt retirement accounts, including 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans and traditional and Roth IRAs to $1,512,350 per person (for cases filed between April 1, 2022, and March 31, 2025). (11 U.S.C. 522(b)(3)(C); (n).) Learn more about retirement accounts in bankruptcy.

Arizona's Bankruptcy Exemption List

Here are some commonly used Arizona bankruptcy exemptions.

Arizona Homestead Exemption

You can protect up to $150,000 of a home, condo, mobile home, or other property covered by the homestead exemption. This amount cannot be doubled. (Ariz. Rev. Stat. §§ 33–1101, 33–1103(A).)

Arizona Motor Vehicle Exemption

Arizona's motor vehicle exemption will allow you to protect up to $6,000 in one motor vehicle or up to $12,000 for an elderly or disabled debtor, an elderly or disabled spouse or dependent of the debtor. (Ariz. Rev. Stat. § 33–1125(8).)

Other Arizona Bankruptcy Exemptions

  • Bank deposits. Up to $300 in a single bank account. (Ariz. Rev. Stat. § 33–1126(A)(9).)
  • Personal property. Up to $6,000 in household furniture and appliances; $2,000 for bible, bicycle, sewing machine, typewriter, computer; funeral deposits to $5,000; firearms to $2,000; $500 for clothing; $400 for musical instruments; $800 for animals; $2,000 for engagement and wedding rings; $250 for books; $250 for a watch; wrongful death awards; $2,000 for prepaid rent or security deposit or 1.5 times the rent, whichever is less (instead of homestead exemption); youth teaching materials; and prescribed health aids. (Ariz. Rev. Stat. §§ 33–1123, 33–1125, and 33–1127.)
  • Tools of the trade. Up to $5,000 in trade implements; $2,500 in farming tools if the debtor's primary income is from farming; all arms and uniforms that a debtor is legally required to keep are exempt; and library and teaching aids of a teacher. (Ariz. Rev. Stat. §§ 33–1130(1)-(3), (5)-(6).)
  • Fraternal benefit society benefits. (Ariz. Rev. Stat. § 20–881.)
  • Life insurance benefits. Up to $20,000 if payable to a surviving spouse or child; payments to a beneficiary under any health, accident, or disability insurance policy, subject to exceptions; destruction of, or damage to, exempt property claims; life insurance cash surrender value subject to exceptions. (Ariz. Rev. Stat. §§ 33–1126(A)(1), 1126(A)(4), 1126(A)(5), and 1126(A)(6).
  • Alimony and child support. (Ariz. Rev. Stat. § 33-1126(A)(3).)
  • Wages. The lesser of 75% of disposable earnings, or, earnings more than 30 times the federal minimum wage per week. (Ariz. Rev. Stat. § 33–1131.
  • Pension benefits. Various employee pension systems are exempt. (Ariz. Rev. Stat. §§ 33–1126 and 38–792.)
  • Qualified retirement plans. Tax-exempt retirement accounts (such as 401ks and IRAs) are exempt. (Ariz. Rev. Stat. §§ 33–1126(B).)
  • Unemployment compensation. Exempt if not commingled with other funds except for court-ordered child support. (Ariz. Rev. Stat. § 23–783(A).)
  • Workers' compensation. Exempt. (Ariz. Rev. Stat. § 23–1068(B).)

Arizona's exemption amounts are adjusted periodically. You'll find the exemption statutes on the Arizona State Legislature's website. To ensure you have the most recent figures, check for any updates on the Arizona Secretary of State's website.

Preventing Bankruptcy Exemption Problems

Exempt your property carefully. The bankruptcy trustee—the court-appointed official assigned to manage your case—will review the exemptions. A trustee who disagrees with your exemptions will likely try to resolve the issue informally. If unsuccessful, the trustee will file an objection with the bankruptcy court, and the judge will decide whether you can keep the property.

Example. Mason owns a rare, classic car worth $15,000, but the state vehicle exemption doesn't cover it entirely. Believing that the car qualifies as art—at least in his mind—Mason exempts it using his state's unlimited artwork exemption. The trustee disagrees with Mason's characterization and files an objection with the court. The judge will likely decide the vehicle doesn't qualify as art.

Purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

Qualifying for Bankruptcy in Arizona

You'll meet the initial requirement if you've never filed for bankruptcy before. Otherwise, check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.

You'll also need to meet specific chapter qualifications.

You'll qualify for Chapter 7 bankruptcy if your family's gross income is lower than the median income in your state for the same size family. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee's website (select "Means Testing Information").

Want an easy way to do this online? Use the Quick Median Income Test. If you make too much, you might still qualify after taking the second part of the "means test." If, after subtracting expenses, you don't have enough remaining to pay into a Chapter 13 plan, you'll qualify for Chapter 7.

Qualifying for Chapter 13 can be expensive because the extra benefits come at a hefty price, and many people can't afford the monthly payment. To qualify, you'll pay the larger of:

Find out more about calculating a Chapter 13 bankruptcy payment.

Hiring a Bankruptcy Lawyer in Arizona

Most people find it worthwhile to get counsel. A bankruptcy attorney will help you:

  • qualify for the chapter of your choice
  • determine when it's time to file
  • help you keep the property you want
  • make sure you don't run afoul of fraud or other issues, and
  • explain when you can stop paying the bills you'll erase in your case.

You can expect creditors to call until you file. It's usually best to ignore them because telling creditors about your bankruptcy can encourage them to take more drastic collection steps before losing the right to collect altogether. However, if you hire counsel and refer creditors to your lawyer, they'll have to stop calling you.

Are you curious whether your case is simple enough to file yourself? Our quiz will help you identify potential complications while educating you about bankruptcy. You'll find it here: Do I Need a Lawyer to File for Bankruptcy?

Filing Your Bankruptcy in Arizona

Now that you've decided to file, the fun begins! Well, not really. The first step—gathering your financial information—can be a bit of a chore. But our bankruptcy document checklist should help you organize what you (or your attorney) will need.

Bankruptcy Document Checklist

Bankruptcy Forms, Means Test Multipliers, and Course Providers

After assembling the documents, your next step will be to prepare the paperwork. Here's what you'll need and where to find it.

  • Bankruptcy forms. You'll find free downloadable bankruptcy forms on the U.S. Courts website.
  • Means test multipliers. Go to the U.S. Trustee website to get the figures needed to complete the means test.
  • Education providers. The U.S. Trustee website also lists providers under "Credit Counseling & Debtor Education." Scroll down until you get to your district. And don't give up—it's a long list. (Individuals must complete credit counseling during the 180 days before filing for bankruptcy and a debt management course after filing the bankruptcy case.)

Arizona Bankruptcy Court Website and Location

Your case starts when you file your paperwork with the local bankruptcy court and either pay the filing fee or request a fee waiver. On the Arizona Bankruptcy Court website, you'll find instructions for filing your paperwork and the local rules (click on "Filing Without an Attorney" and "When You File").

The courthouse you'll be assigned to will depend on the county you live in. Be aware that some Arizona bankruptcy court locations don't accept payments or cash—review the site carefully.

Phoenix

Tucson

Yuma

US Bankruptcy Court

230 N 1st Ave, 101

Phoenix, AZ 85003

602-682-4000

(Apache, Gila, Maricopa, Navajo counties)

US Bankruptcy Court

38 S Scott Ave, 100

Tucson, AZ 85701

520-202-7500

(Cochise, Graham, Greenlee, Pima, Pinal, and Santa Cruz counties)

US Bankruptcy Court

98 W 1st St, 2nd Floor

Yuma, AZ 85364

928-261-4500

(La Paz, Mohave, and Yuma counties)

After Filing for Bankruptcy in Arizona

Your creditors will stop bothering you soon after you file. It takes a few days because the court mails your creditors notice of the "automatic stay" order that prevents most creditors from continuing to ask you to pay them. Here's what will happen next:

  • You'll turn over financial documents proving the statements in your bankruptcy paperwork.
  • You'll attend the 341 meeting of creditors—the one appearance all filers must attend.
  • You'll complete a debtor education course and file the completion certificate.

These things must happen before you get a Chapter 7 bankruptcy discharge. Chapter 13 filers will also attend a repayment plan confirmation hearing and complete the three- to five-year payment plan.

Need More Bankruptcy Help?

Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

Our Editor's Picks for You

More Like This

Which Bankruptcy Chapter Should I File to Keep My House?

Can I Keep My Car in Chapter 7 Bankruptcy?

The Arizona Homestead Exemption

What to Consider Before Filing Bankruptcy

What Not to Do Before Bankruptcy

Chapter 7 Bankruptcy—Who Can't File?

Options If You Can't Afford a Bankruptcy Lawyer

Helpful Bankruptcy Sites

Department of Justice U.S. Trustee Program

United States Courts Bankruptcy Forms

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

Updated April 18, 2022

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