Arizona received over 16,000 bankruptcies filings in 2019. Many got rid of debts and a fresh start with the help of the bankruptcy system. If you are struggling to pay your debts, or adversely affected due to coronavirus hardship, Ascend wants to help. Below is information about filing bankruptcy in Arizona.
Chapter 7 Bankruptcy in Arizona
Filing Chapter 7 bankruptcy in Arizona can get rid of your debts in about four to six months. That is the typical time it takes to complete a no-asset Chapter 7 case in Arizona. Chapter 7 bankruptcies are intended for people who cannot afford to pay any portion of their debts. However, you must first pass an income requirement test to qualify for a bankruptcy discharge (forgiveness of debt) in Chapter 7.
If you pass the Arizona means test, you can get rid of most unsecured debts through Chapter 7. Unsecured debts discharged in Chapter 7 include medical bills, personal loans, some old income tax debt, old utility bills, credit card debts, and most personal judgments. Unsecured creditors hold debts that are not secured by collateral.
If, however, you want to get rid of secured debts, like car loans and mortgages, in Chapter 7, you need to surrender the asset to the creditor. The creditor must accept the asset as full payment of the amount owed. For more information about Chapter 7 bankruptcies, check out our Chapter 7 Bankruptcy Process article.
Most people work with a bankruptcy attorney in both a Chapter 7 and Chapter 13, but there is the option to file without a bankruptcy attorney. You may want to read filing a bankruptcy without an attorney in Arizona. If you go this route, you may want to review the Arizona Chapter 7 Pro Se handout and check out the required forms.
Arizona Means Test
An important element in filing for bankruptcy relief is the Bankruptcy Means Test. The Means Test is a bankruptcy form that calculates your average monthly and annual income. The test compares your income against the median income of other households in Arizona.
If your average annual income or median income is below Arizona’s median income, you may qualify for a bankruptcy discharge under Chapter 7. On the other hand, if your median income is above the state median income, you may need to file under Chapter 13. The Means Test is a two-part test, so it is not a simple pass-fail test. If you “fail” the first section, you can “pass” the second section and still qualify to file under Chapter 7.
You can estimate whether you qualify for a Chapter 7 using the Arizona means test data below:
Chapter 7 Bankruptcy Arizona Income Limits
Arizona’s median income figures for the Means Test are adjusted periodically, based on IRS and Census Bureau data. Arizona’s median income for bankruptcy cases filed on or after May 1st, 2020, is:
|# of People||Annual Income|
For households with more than 9 members, add $9,000 for each additional family member. You should always check the US Trustees website for the most current figures when calculating the Means Test.
Chapter 13 Bankruptcy in Arizona
For those who make above the income limit for Chapter 7, debt relief can still come through a filing a Chapter 13 bankruptcy. A Chapter 13 Bankruptcy in Arizona case allows you to restructure your debts into an affordable monthly plan. By restructuring debts, many people can afford to keep their homes and vehicles in Chapter 13.
Chapter 13 stops foreclosures, repossessions, and wage garnishments. It also allows you to pay back mortgage payments, past-due car payments, and tax debt over three to five years through a bankruptcy plan. In addition, Arizona allows you to reduce unpaid child support and alimony. However, you must resume your normal domestic support payments to remain in Chapter 13.
In a Chapter 13 plan, some debtors (the person filing the bankruptcy case) can lower their car loan payments and get rid of second mortgages, if they meet certain requirements. Learn more about filing Chapter 13 in Arizona in our Chapter 13 Guide. You can estimate your Chapter 13 plan payment using the calculator below.
Arizona Credit Counseling and Debtor Education Courses
When you file for bankruptcy relief under Chapter 7 or Chapter 13, you must complete two bankruptcy courses as part of your filing. This includes a credit counseling course prior to filing a bankruptcy case; and a debtor education course after filing to receive a bankruptcy discharge.
The United States Trustee’s office has approved state-specific companies that offer bankruptcy courses. You can access a list of companies in Arizona offering bankruptcy courses on the UST website. Both courses are available online for a small fee.
Bankruptcy exemptions protect the equity in your property in a bankruptcy case. Likewise, property not protected by bankruptcy exemptions may be sold in a Chapter 7 case. Note also that foAr Chapter 13 cases, non-exempt equity in property can increase the bankruptcy plan payment. Therefore, it is important to review the bankruptcy exemptions and choose those exemptions that best protect your assets.
Note also that Arizona has opted out of using the federal bankruptcy exemptions. As a result, you are required to use Arizona bankruptcy exemptions if you have lived in Arizona for two years before filing a bankruptcy petition. Most of Arizona’s bankruptcy exemptions are found in Title 33 of the Arizona Revised Statutes. While some exemptions are found in other statutes.
The Arizona Bankruptcy Court maintains a list of Arizona state bankruptcy exemptions available to the public. However, the exemption amounts are subject to adjustment. Always check that you use the most current information available when analyzing bankruptcy exemptions.
Bankruptcy Courts and Trustees for Arizona
Arizona has one district for bankruptcy filings. However, there are five Arizona bankruptcy court locations throughout the state. Each bankruptcy court handles cases for specific counties in Arizona.
- U.S. Courthouse and Federal Building, 230 North 1st Avenue, Suite 101, Phoenix, AZ 85003
- James A. Walsh Federal Courthouse, 38 South Scott Avenue, Ste 100, Tucson, AZ 85701
- John M. Roll U.S. Courthouse, 98 West 1st Street, 2nd Floor, Yuma, AZ 85364
- U.S. Magistrate Courtroom, AWD Building, 123 North San Francisco Street, Flagstaff, AZ 86001
- Mohave County Superior Court, 2225 Trane Road, Courtroom R, Bullhead City, AZ 86442
Some locations may not accept bankruptcy filings or accept cash payments for filing fees. If you have questions, call the court before visiting its physical location.
Arizona has several bankruptcy judges that hear bankruptcy matters. The court assigns a bankruptcy trustees to each case. The bankruptcy trustee administers the bankruptcy estate. There are 17 Arizona Chapter 7 trustees and three Arizona Chapter 13 trustees.
In addition to the above, review Arizona local bankruptcy rules before filing a bankruptcy case in Arizona. Some local rules may differ slightly from the Federal Bankruptcy Rules.
Alternatives to Filing Bankruptcy in Arizona
Are you unsure whether you should file a Chapter 7 or Chapter 13 case? Are there other alternatives to filing bankruptcy? Explore Ascend’s Debt Settlement Guide and Debt Consolidation Comparison Guide to learn more about debt relief options that do not involve bankruptcy.
Finally, Ascend has numerous resources to help you get out of debt. Contact us at Ascend for more information about bankruptcy and debt relief options.