What Happens When You Claim Bankruptcy In Arizona?

Debt is a concept most of the population will have to deal with at a point in their lives. In Phoenix alone, over ten thousand bankruptcies were filed in the last five years. When an individual or an organization can’t honor its financial obligations to its lenders, they file for bankruptcy. Federal Bankruptcy laws in the US are designed to provide you with a release and discharge from debts accrued. 

With bankruptcy, individuals or organizations are usually in a vulnerable state because their properties, businesses, and future are generally at risk, so following the right procedures and utilizing the laws may help you during the bankruptcy period. Find out more about Arizona Bankruptcy and Debt Solutions in this article.

Bankruptcy Laws

Bankruptcy laws in Arizona are essential because they give an honest debtor a new start in life by alleviating the debtor’s debt and paying lenders in an organized manner. That ensures the debtor has property available for payment.

In Arizona, most cases are under the three main chapters of the Bankruptcy Code: Chapter 7, 11, and 13. Each chapter has its set of requirements and is utilized depending on an individual’s or organizations’ financial situation. Chapter 7 is a common type of bankruptcy filed in Arizona, and it is usually when an individual has assets that are less than the debt owed.

Arizona Bankruptcy and Debt Solutions: Chapter 7

Chapter 7 usually handles unsecured debts such as medical bills, credit card debt, civil judgments, and unsecured loans. As mentioned above, not all types of debts can be eliminated under Chapter 7. Some unsecured debts are usually not discharged under Chapter 7 in Arizona. They include student loans, alimony, child support, crime, criminal fines, and finally secured loans such as house payments. In Arizona, people eligible to utilize chapter 7 bankruptcy are people who have below the average income for a family of their size, and eligibility is arrived at by analyzing your financial position.

After filing for bankruptcy, bankruptcy courts can seize your assets and sell them to repay debts under Arizona and federal law. Protected assets include houses and cars. Chapter 7 mainly liquidates assets free of lien that an individual owns, but most people in Arizona keep their houses and vehicles. Individuals are allowed an exemption of up to $150,000 of equity on the home. For married couples, they are given equity of up to 10,000 for one or two vehicles. Household goods are also exempt. Wedding rings and retirement accounts such as 401(k) and IRA’s are exempt in Arizona.

What to Expect After Filing for Bankruptcy

Before filing a bankruptcy case, an individual gathers all the necessary documents and information and prepares a bankruptcy document. After this, the case is filed, and the bankruptcy court in Arizona issues a directive that ensures there are no collection efforts directed towards you. This ensures that lenders cannot call the debtor, and you cannot lose your house. After about a month, you are expected to meet a bankruptcy trustee assigned to the case, and it’s known as the meeting of Creditors. 

This meeting avails the opportunity to the lenders to ask relevant questions and the trustee to confirm if the information disclosed on the bankruptcy filing is accurate. Two to three months after the meeting of the creditors, the bankruptcy court in Arizona requires you to attend a counseling course that can be done online. After this class, the court officially closes the case and eliminates the debts.

Chapter 11

Chapter 11 bankruptcy cases in Arizona often deal with high net worth individuals, corporations, and business enterprises. Chapter 11, unlike chapter 3 deals with complex debt affairs while allowing businesses to remain in operation. Chapter 11 will enable businesses to renegotiate debt with creditors and also release obligations from burdensome leases.

Individuals operating with more significant amounts of money and complicated financial structures can utilize chapter 11 to deal with bankruptcy which may distance financial lenders from providing an individual with time to form a post-bankruptcy plan.  Chapter 11’s strategy of dealing with bankruptcy involves formulating methods to cut expenses and add new income sources.

Chapter 13

Finally, Chapter 13 is an option Arizonians utilize, which gives debtors a leeway to repay their debts over a prolonged period. Repayment is usually accorded to what an individual may afford, reducing the overwhelming burden of debt. Chapter 13 is generally eligible in Arizona for people not qualified to use chapter 7 by allowing an individual to repay some of the debt while ensuring the house and car are not repossessed.