Bankruptcy
Bankruptcy in Arizona: what you need to know before filing
Understanding Arizona bankruptcy laws is crucial before filing.
Learn about Chapter 7 and 13 requirements, state exemptions including $400,000 homestead protection, and how bankruptcy affects your credit.
Jan 27, 2025
LegalBid
Understanding Bankruptcy in Arizona
Filing for bankruptcy is a significant decision that can provide relief from overwhelming debt. Arizona has specific bankruptcy laws that dictate eligibility, exemptions, and the process itself. The two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13.
• Chapter 7 Bankruptcy: Often referred to as “liquidation bankruptcy,” this option allows you to discharge most unsecured debts, such as credit card balances and medical bills. To qualify, you must pass a means test that compares your income to the state median.
• Chapter 13 Bankruptcy: Known as “reorganization bankruptcy,” this option is for individuals who have a steady income and want to keep their assets while repaying creditors over a 3-5 year plan.
“Bankruptcy laws are complex, and filing incorrectly can result in delays or even case dismissal.”
Arizona Bankruptcy Exemptions
One of the biggest concerns for individuals filing bankruptcy is whether they will lose their assets. Fortunately, Arizona offers state-specific exemptions, including:
• Homestead Exemption: Protects up to $400,000 of equity in your primary residence.
• Vehicle Exemption: You can protect up to $15,000 in a car’s value.
• Personal Property: Certain household items, tools of trade, and retirement accounts are protected.
The Impact on Your Credit
While bankruptcy can provide a fresh financial start, it will remain on your credit report for 7-10 years. However, many people start rebuilding their credit soon after filing by obtaining secured credit cards and making timely payments.
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