Bankruptcy Laws and Procedures in Arizona
Like most states, Arizona has bankruptcy laws on its books that guide residents through the bankruptcy process. Filing for financial relief is a decision that is not made lightly, and the process of getting said relief can be complicated, confusing and frustrating.
Bankruptcy Filing Options
Individuals filing for bankruptcy in Arizona have several filing options, but two are the most common. Chapter 7 bankruptcy is a liquidation of assets. The person filing lists all of his or her assets, and all debts, and the bankruptcy court determines what is to be sold to pay creditors. Once the debts have been satisfied, the person who filed is granted a fresh start, free of the previous debtors.
A Chapter 13 bankruptcy is a reorganization of debt. The person filing has to create and submit a repayment plan to the bankruptcy court. The plan outlines how the person plans to repay the debt over a period of three to five years. If the court approves the plan, the bankruptcy trustee collects the payments at the designated times and the person continues to pay the repayment plan until all debts are satisfied. At the end of the payment period, any remaining debt is discharged and the person is granted a fresh financial start.
Choosing between the two options depends on what the filer wants to accomplish. If the filer wants to keep a portions of assets such as his or her home and car and pay creditors but just needs help organizing the process, a Chapter 13 filing could be ideal. But if a person just want to stop paying and walk away, then a Chapter 7 is the better option.
Bankruptcy Filing Process
The first thing a person filing for bankruptcy must do is gather all of one's bills. Attaining a copy of the filer’s credit report is a good idea, too. The report will list all of the person’s known creditors, as well as his or her financial standing with each. A filer also needs to make a list of all his personal assets, large and small. Everything from the house down to his shoes must be included on the asset list. These two lists will be used to determine the type of bankruptcy that can be filed as well as the repayment amount if the person filing wants to file a Chapter 13.
Once the type of case to file is known, the court will set up a Meeting of Creditors. This is the opportunity for the bankruptcy court to ask the filer questions about one's financial state, go over the repayment plan if the case is a Chapter 13 and discuss what assets will be liquidated in the event of a Chapter 7 case. Creditors are also permitted to attend and object to being included in the filing or ask to be paid more than other creditors.
After the meeting with the creditors, the court will render a decision. In the case of a Chapter 7, if the court grants the petition, the agreed-upon assets are sold and the creditors are paid. For a Chapter 13 case, if the petition is granted, the person who filed would begin to make the payments on the plan. Once all plan payments are made, the court discharged the remaining debt.
Regardless of the bankruptcy chosen, a person filing for bankruptcy is allowed to keep a certain amount of assets. These are exemptions and are not included in the liquidation for a Chapter 7 or the repayment plan for a Chapter 13 (in some cases, a person wanting to file a Chapter 13 case can opt to liquidate certain assets to lower the repayment amount). In the state of Arizona, some of these exemptions include:
- Primary residence
- Primary vehicle
- Personal assets up to $4,000; a married couple can double that to $8,000
- Personal belongings that have no resale value such as family portraits
The bankruptcy process is complicated and one missed filing deadline could jeopardize a person’s chances of attaining the financial relief one needs, which would be an unfortunate result. Although it is not required for a person to seek legal counsel before filing bankruptcy, gaining the perspective of legal professional cannot hurt. The extra guidance could accelerate a person attaining his or her needed financial relief.