It’s more than just getting rid of a couple of bills. Bankruptcy allows residents in Arizona and other parts of the country get a fresh start on life. Filing for Chapter 7 bankruptcy allows individuals to get rid of most if not all of their debts and start over again with a better financial picture.
What is Bankruptcy?
Bankruptcy as defined by the United States Courts allows individuals or businesses to liquidate their assets or reorganize them for debt relief. Offered in three main Chapters, 7, 11, and 13, this process can help people start over again without any anguish. Those filing for bankruptcy, Chapter 7, or other any other type have been able to find relief as soon as they have filed.
What You Need to Do to Qualify
There is a specific process when you decide to file for bankruptcy. Even if you are overwhelmed with debt, the bankruptcy court still needs to prove that your financial situation would benefit from a bankruptcy. Before you can file for a bankruptcy you must do the following:
- Fall at or below the median income level for your state.
- Pass the means test.
- Take the required credit counseling courses.
- File Your Petition with the applicable exemptions.
As bankruptcy law states if you do not follow the process, your bankruptcy case could be dismissed without any debt discharged. While debtors can file bankruptcy on their own (called “pro se filing”) it is highly recommended you work with a bankruptcy attorney who understands all the details of bankruptcy law.
Median Income Levels for Arizona Residents
In each state, a debtor wishing to file for a Chapter 7 bankruptcy must fall at or below the median or average income level for the state they reside in. The income level varies based on the size of the family. Arizona residents must meet or fall below the following income levels:
- A single individual - $42,603
- Family of two - $55,404
- Family of three – $59, 659
- Family of four – $67,113
For every additional family member above four, a debtor must add $7,500 per person. These income levels change from year to year based on inflation and other factors. If you find that you are above the median income level, you still may file for bankruptcy. Your attorney will determine if you qualify based on a means test.
All about the Means Test
This test is a series of calculations that examines a debtor’s financial information and then determines if the debtor does meet the requirements put forth by the bankruptcy court. The means test is helpful for those who have high income levels, with high or complex levels of debt. If you pass the means test, but do not meet the median income level, there is a good chance your Chapter 7 bankruptcy case will still be discharged successfully. Ask your attorney if you need the means test for your financial situation.
Credit Counseling Courses
Federal law passed an Act in 2005 called the Bankruptcy Reform Act. One of the requirements outlined in this act, involves credit counseling courses for each individual filing for bankruptcy. A debtor must take a course before and after he files for bankruptcy. The course is short, typically not more than 90 minutes, and oftentimes it can be taken online or over the phone. Talk to your Chapter 7 bankruptcy attorney about a reputable company that provides these courses.
Bankruptcy Exemptions in Arizona
You have worked with your attorney and have gathered all the appropriate information for your Chapter 7 bankruptcy. The next step is to prepare the petition. This document describes to the court and to your creditors why you are unable to pay your debts and why you need a bankruptcy to free yourself from your financial quagmire.
As you attorney prepares you petition, he or she will talk to you about certain exemptions you are able use. These exemptions allow you to keep certain assets and personal property. In Arizona, residents must follow state law regarding exemptions. Federal laws do not apply for Chapter 7 bankruptcy exemptions.
Some of these exemptions include:
- Homestead exemption – Your primary residence is exempt up to $150,000
- Renters – For those renting an apartment, house, or condo, up to $1000 is exempt.
- Mobile Home – Up to $30,000 in value for a primary residence.
- Home goods and furnishings - Not to exceed $4,000 in value.
- 1 Kitchen Table (plus four chairs)
- 1 Dining Room Table (plus four chairs)
- 1 Living Room Sofa
- Enough Chairs for each family member in the house plus one
- 3 coffee or end tables
- 2 lamps
- 1 rug
- 1 Bed, bedding, dresser, and lamp for each bedroom
- All homemade drawings or paintings
- 1 Television set
- 1 radio
- 1 stove
- 1 refrigerator
- 1 washer and dryer
- 1 vacuum cleaner
- Clothing – up to $500 in apparel.
- Vehicle – Up to $5,000 (or $10,000 if debtor is disabled)
- Wages – Up to 75% in wages not including taxes.
- Insurance and Benefits
- Proceeds of life insurance –Up to $50,000.
- 100% Fraternal Benefits Society
- 100% Worker’s Compensation
- 100% Employee trust plan benefits
- 100% Disabled person’s aid
- 100% Federal Civil Service and Retirement Benefits
- 100% Social Security Benefits
- Tax Proceeds – Up to $5,000 each in earned, federal, or state tax refund proceeds
The amounts for each exemption can change from year to year. Additional exemptions may be available depending on your financial status.
After your attorney has prepared your petition and outlined the exemptions, your case should be resolved and discharged within three to six months. Chapter 7 may be the way to go to find the financial relief you need.
Arizona Bankruptcy Courts
United States Courthouse
230 North First Avenue, Suite 101
Phoenix, Arizona 85003
Phone: (602) 682-4000
James A. Walsh United States Courthouse
38 South Scott Avenue
Tuscon, Arizona 85701-1704
Phone: (520) 202-7500
325 West 19th Street, Suite D
Yuma, Arizona 85364
Phone: (928) 783-2288