Arizona Bankruptcy Attorney: Bankruptcy Process

If you are filing for Chapter 7 bankruptcy in Arizona, you must file the bankruptcy petition and other forms in the appropriate Arizona district court as well as participate in credit counseling. It highly advised you consult with an Arizona Bankruptcy Attorney today to discuss your particular situation.

Because most of bankruptcy is governed by federal bankruptcy laws, the general bankruptcy filing process in Arizona is similar to other states. However, there is some Arizona-specific information you’ll need for the bankruptcy forms. You’ll also have to know about the Arizona bankruptcy exemptions, find an approved credit and debt counselor in Arizona, and get some information on local forms, like the mailing matrix. 

Getting Credit Counseling and Taking a Financial Management Course in Arizona

In order to qualify for Chapter 7 bankruptcy, you must show that you received credit counseling from an agency approved by the U.S. Trustee in Arizona within the six month period before you file for bankruptcy. You’ll also have to take a personal financial management class (also called debtor) before you get a bankruptcy discharge. You can find the list of approved Arizona credit counseling agencies here.

Completing the Bankruptcy Forms in Arizona

When you file for Chapter 7 bankruptcy, you must complete a bankruptcy petition, a number of schedules containing detailed information about your finances, and several other forms, including a lengthy form known as the “means test” for Chapter 7 bankruptcy.

Finding Means Test Information for Arizona

When you file for bankruptcy in Arizona, you must compare your income to the median income for a household of your size in Arizona. If your income is less than the median, you will be eligible to file for Chapter 7.

If your income is above Arizona’s median income, you still might qualify for Chapter 7, but you’ll have to provide detailed information about your expenses and payments on secured debts in order to find out.

Here’s how to find the Arizona-specific figures for these means test forms:

Arizona median income

For a one-person household in Arizona, the median income is $41, 385. For a two-person household it’s $53,781, for a family of three it’s $56,508, and more for larger families. 

Standard deductions

Forms 22A and 22C have a comprehensive list of expense categories, such as housing, transportation, food, and childcare. For some of those categories (like childcare), you provide the actual amount you spend. For others, you plug in a predetermined amount -- sometimes that figure is standard for the whole country, other times it varies by county or region. 

You can find all of the Arizona area, borough, and region-specific figures you’ll need for Forms 22A and 22C on the U.S. Trustee’s website at www.justic.gov/ust.  Click on “Bankruptcy Reform” and then “Means Testing Information.”

Getting Local Bankruptcy Forms

Some judicial districts and bankruptcy courts require bankruptcy filers to complete additional “local forms.” To find out if your court requires additional forms, contact the bankruptcy filing clerk. Some courts post these forms online on the court’s website. (Below you’ll find a link to Alabama’s bankruptcy court.)

For example, in Arizona the bankruptcy court has issued very specific guidelines for the mailing matrix (the list of all your creditors that you are required to file as part of your bankruptcy case).

Filing in the Arizona Bankruptcy Courts

Since there is only one judicial district in Arizona (see below for the link), you don’t need to worry about the rules for filing in the correct judicial district.

You can use the Court Locator tool on the U.S. Trustee’s website to find bankruptcy court locations and websites. The Arizona bankruptcy court has courts and offices in Phoenix, Tucson, and Yuma. There are also bankruptcy courtrooms in Flagstaff and Prescott.

Arizona Bankruptcy Attorney-Bankruptcy Misconceptions

People traditionally talk about bankruptcy without ever consulting with a qualified Arizona Bankruptcy Attorney. Consequently, there are many myths and misconceptions the general public has about bankruptcy. I will attempt to clarify 11 such myths or misconceptions here.

1. All debts are cleared in a Chapter 7 bankruptcy. Certain types of debts cannot be discharged, or erased. They include child support and alimony, student loans, and debts incurred as the result of fraud.
2. I will lose everything. This is a misconception that keeps people who should file for bankruptcy from doing it. While the bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), and money in qualified retirement plans, household goods and clothing.
3. I'll never have credit again.  This is not true. It won’t be long before you begin to receive credit card offers again. They'll just be from lenders that will charge very high interest rates. However, this is a process you will have to go through in order to obtain a high credit score. We don't advise our clients to run up a lot of bills, but if you need to get an automobile you will be able to get credit. Also, if you have a credit card with a zero balance on the day you file for bankruptcy, you don't have to list it as a creditor since you don't owe any money on it. That means you might be able to keep that card even after the bankruptcy.
4. If you're married, both spouses have to file for bankruptcy. Not necessarily. If the debt is solely in the other spouses name then they can file a single bankruptcy. However, you will have to list the liabilities of the spouse not filing to relieve them of any liability. However, if spouses have debts they want to discharge that they are both liable for, they should file for bankruptcy together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who did not file.
5. It's very difficult to file for bankruptcy. It is not difficult. But it is recommended that you hire a lawyer to make sure that all the forms and documents are filled out and filed correctly.
6. Only "deadbeats" file for bankruptcy. Don’t be too proud to file for bankruptcy. It is more common than you think. Donald Trump, one of the world’s wealthiest individuals filed for bankruptcy in his earlier years. Most people file for bankruptcy after a life-changing experience, such as a loss of job, a serious illness, or a divorce. They've struggled to pay their bills for months and just keep falling further behind. If you have to file bankruptcy because you abused your credit then simply use this as a life lesson and don’t repeat the same mistake.
7. I should not include certain creditors in my filing because it's important to me to pay them back someday and if the debt is discharged, I can't ever repay them. It's a commendable sentiment. After a bankruptcy, you are no longer obligated to repay them, but you would always have that opportunity. If your conscience bothers you because you didn't pay your debts, there's nothing in the bankruptcy code that prevents you from doing that once you get back on your feet. However, bankruptcy is an all-or-nothing deal, so you must include all your creditors in the petition.
8. You can't get rid of back taxes through bankruptcy. Generally speaking, this is true. However, there are exceptions. To have a chance of success, you have to file all your returns and the taxes owed need to be at least three years old.
9. You can only file for bankruptcy once. The truth is you can only file for Chapter 7 bankruptcy once every eight years. For Chapter 13 reorganization, you can file more often than that, but you cannot have more than one case going at one time. Still, it's not very good to make filing bankruptcy a habit as you will never be able to retain a good standing with credit agencies.
10. I can max out all my credit cards, file for bankruptcy, and never pay for the things I bought. This is not a good idea. It's called fraud and bankruptcy judges tend to frown upon it. The trustee in your case will review all your purchases right before your filing. And the trustee knows what to look for to find fraud. Don’t commit a criminal act. The consequences are far more severe than a simple bankruptcy.
11. Everyone will know I've filed for bankruptcy. Unless you're famous or a prominent person and the filing is picked up by the media, probably the only people who will know about a filing are your creditors and anyone you decide to tell. While it's true that bankruptcy is a public legal proceeding, there are so many people who file for bankruptcy that publications do not have the space nor inclination to publish all of them.

Arizona Bankruptcy Attorney-What Is Chapter 7 Bankruptcy?

The majority of all consumer bankruptcy filings are for Chapter 7. For those in dire financial straits, Chapter 7 provides a means for a fresh start. Chapter 7 is oftentimes referred to as liquidation because debtors are required to sell their non-exempt resources and distribute the proceeds to creditors. While the prospect of liquidating your property is indeed troubling, the key here is that debtors are only required to sell non-exempt resources. In many instances this means that debtors can file for Chapter 7 without losing any assets. Gaining a better understanding of Chapter 7 bankruptcy will help you determine whether it is suitable for your circumstances.

Who is a Candidate for Chapter 7 Bankruptcy?

Liquidation can be problematic for businesses so Chapter 7 is generally most appropriate for individual debtors.  But even among individuals, Chapter 7 is not always the best alternative; Chapter 13 bankruptcy sometimes provides a better remedy to those with a regular income.  It is safe to say, however, that for debtors with little or no income, Chapter 7 is usually the most suitable type of bankruptcy.  The one limitation is that debtors who have had their debt discharged under Chapter 7 or have completed a Chapter 13 plan within the past eight years cannot petition for Chapter 7.

Do You Qualify For Chapter Seven?

In determining whether to file for Chapter 7 you should evaluate your financial situation with a bankruptcy attorney.  Ultimately you must decide whether you have enough debt to justify filing for bankruptcy.  The amount of debt is not as important as your inability to repay it.  Some debtors file for bankruptcy with a relatively small amount of debt while others wait until they have accumulated exorbitant amounts of debt before filing.  With the assistance of an attorney, you should evaluate your debt, income, expenses and assets.  A careful examination of this will help you determine whether Chapter 7 is suitable.

Chapter 7 only discharges certain types of debt so the first thing to consider is whether filing will discharge your debts.  In most instances, Chapter 7 discharges the following types of debt:

• Medical bills
• Civil judgments
• Credit card debt
• Unsecured loans

You also need to know which types of debt cannot be discharged under Chapter 7.  The following debts fall into this category:

• Student loans
• Unpaid taxes
• Alimony
• Child support
• Secured loans such as mortgage and car payments

Because Chapter 7 does not discharge every type of debt, the real question is whether your dischargeable debt is high enough to justify filing for Chapter 7.  If your debt consists mostly of student loans and unpaid taxes, Chapter 7 is probably not a suitable remedy.  If your debt consists mostly of credit card debt and medical expenses, however, Chapter 7 could be very appropriate.  As a general rule, this type of bankruptcy is only suitable if your dischargeable debt outweighs your assets and you have little chance of repaying the debt.

Your evaluation would not be complete without also considering your assets.  Some assets are exempt from liquidation, meaning that you can retain them.  Other assets must be surrendered and sold during Chapter 7 to provide creditors with at least partial payment.  In most instances, the following assets are exempt from liquidation:

• One automobile
• A primary place of residence and the equity in the property
• 401K plans
• Life insurance policies
• Personal effects such as household items and clothing.

Any non-exempt assets can be subject to liquidation.  Debtors with a significant amount of non-exempt assets must be ready to surrender them if they file for Chapter 7.

The U.S. Bankruptcy Code requires debtors to disclose all of their monthly income and expenses.  In addition to wages earned, debtors must disclose all other sources of income.  The income and expenses are subjected to a means test.  Debtors who pass the means test are presumed to qualify for Chapter 7.  Debtors who do not qualify may still be able to file for Chapter 13.

How Chapter 7 Works in Arizona

When you file for Chapter 7, an automatic stay is immediately issued which prevents creditors from collecting debts and repossessing your property. A trustee is appointed to collect all non-exempt assets. The trustee then sells the non-exempt assets and divides the proceeds among your creditors. Not everybody loses their assets – exempt assets are not subject to forfeiture. Once the bankruptcy is complete all of your dischargeable debts will be discharged.

If you are concerned about losing certain assets in a Chapter 7 proceeding, you may be able to sign what is called a reaffirmation agreement. A reaffirmation agreement essentially permits you to keep certain property outside of the bankruptcy. By executing a reaffirmation agreement you can continue to pay down a mortgage or car payment to prevent forfeiture.

The most difficult part of filing for Chapter 7 is determining whether it is suitable to do so. An attorney can help you evaluate your circumstances. After deciding that Chapter 7 is indeed suitable, the bankruptcy proceeding mostly consists of following the rules outlined in the U.S. Bankruptcy Code.