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Bankruptcy in Arizona


Who can file bankruptcy in Arizona?


Any individual or business who resides in the state of Arizona is eligible for bankruptcy relief once every six years.  This does not mean that filing for bankruptcy is the right decision for everyone who finds themselves struggling to keep up with their debts.  For some individuals and businesses, filing for bankruptcy will actually cost them more than simply making payment arrangements with their creditors.  Bankruptcy should always be used as a last resort by people and businesses who truly do not have any liquid assets or are in immediate danger of foreclosure or repossession.


What do  I need to know before filing bankruptcy in Arizona?


The most important thing to understand before filing for bankruptcy is that there are two different types of bankruptcy.  These two different types of bankruptcy are known as Chapter 7 bankruptcy and Chapter 13 bankruptcy.  Each of these unique types of bankruptcy are governed by their own set of laws.  While in Chapter 7 bankruptcy the debtor can have their debts completely discharged, debtors are not able to protect their assets from being liquidated in order to pay off their creditors.  Chapter 13 bankruptcy allows debtors to keep some of their assets provided they can make payments towards their debts however, Chapter 13 bankruptcy does not allow for the total discharge of debts.  In order to determine whether or not you are eligible to file for Chapter 7 bankruptcy or will be forced to claim Chapter 13 bankruptcy, the court will apply what is known as a means test.  A means test involves comparing your annual income to the median income in the state of Arizona.  If your income is higher than the median income, you will be forced to claim Chapter 13 bankruptcy.  In this case, you will need to decide whether or not filing for bankruptcy is really in your best financial interest.


What types of debts can be discharged as part of a bankruptcy proceeding in Arizona?


The majority of debts can be discharged as a result of a Chapter 7 bankruptcy settlement however, there are a few exceptions.  People are not able to discharge any debts owed to secured creditors as a result of a bankruptcy settlement.  Examples of secured creditors include a home mortgage or car loan.  In these cases, people are often forced to choose between two options.  The first option is to return the property which is securing the credit, for example your home or vehicle.  The second option is to make payment arrangements with the creditor that will satisfy both your current and past obligations.  In many cases, people can be given as much as 5 years to pay off their past obligations to these creditors.


Will I lose my house and car if I file for bankruptcy in Arizona?


This greatly depends upon whether or not your home or car is currently being financed by a secure creditor.  For instance, if you own your vehicle, you are allowed to safeguard up to $5,000 in equity in your vehicle.  If your vehicle is being financed, you will not be able to keep your vehicle and discharge the debt which surrounds it.


Do I really need to hire an Arizona bankruptcy attorney to represent me?


While there is certainly no law that requires you to produce counsel in a bankruptcy case, hiring an Arizona bankruptcy attorney is certainly in your best interest.  Not only will a bankruptcy attorney be able to assist you in filing all necessary paperwork with the court, they will also be able to advise you on the best way to proceed with your case.  This is especially important for individuals who are concerned about the possibility of losing their home or other valuable assets.

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