A Brief Introduction to Arizona State Bankruptcy Law
Before Filing
In every U.S. state, citizens are required to undergo some credit counseling within the 180 day period before they file for bankruptcy. The councilor will recommend whether bankruptcy is an appropriate action, and whether it can be avoided. A certificate of completion will be awarded afterwards, which must be shown to file for bankruptcy.
It is generally recommended that individuals not file pro se, that is without an attorney, because of the complications of filing and the potential to miss out on important financial benefits. Some free pro bono legal services may be available to you depending on your eligibility. Contact the Arizona Foundation for Legal Services and Education Modest Means Program (866.637.5431) or the Community Legal Services (602.258.3434) to find out more.
Filing for Arizona Bankruptcy
You can file for bankruptcy at a Arizona branch of the United States Bankruptcy Court. These are located in Phoenix, Tucson, Yuma, Prescott, and Flagstaff. Some filing can also be done electronically through the Court’s website.
Many different types of forms are necessary depending on which Chapter Arizona bankruptcy you file under. For a complete list of forms listed by Chapter type, visit here:
Arizona Corporate Bankruptcy
Most businesses file for one of two types of bankruptcy. They are:
• Chapter 7: This is for companies who don’t think they’ll ever become or return to profitability. If such is the case, then they should liquidate their assets to pay back their creditors as soon as possible. Banks, who took the least risk in loaning money, are paid back first, and stockholders, who took the most risk, are paid back last, if at all. Sometimes the name of a company may survive Chapter 7 bankruptcy, having been sold to another individual or business as one of the dissolved company’s assets, but the company itself will not survive.
• Chapter 11: If a company finds its self temporarily unable to pay back creditors, then it can file for Chapter 11 bankruptcy, which allows for court-assist corporate restructuring to ensure that the debt will be repaid and to demonstrate to investors that the business leaders are competent.
Arizona Personal Bankruptcy
Individuals filing for bankruptcy face a similar decision as those facing business leaders. Some of the options open to them are even the same.
• Chapter 7: As with businesses, this type of bankruptcy helps an individual to pay back outstanding debts by liquidating their assets. Only certain people are eligible for Chapter 7 bankruptcy by Arizona law. You must either be at or below the median-income level for an Arizona citizen or you must pass an Arizona Means Test assessing you ability to pay off the debt without liquidation. You will lose property you own, but if you own little and most of your debt is through credit cards or other unsecured loans, this is a good option.
• Chapter 13: As with Chapter 11 and businesses, this is a restructuring option where instead of liquidating assets you are ordered by the court to use your discretionary income to slowly pay off your debt during a period of up to five years.
• Chapter 11: Some high income, high debt persons may also file for Chapter 11 bankruptcy, though this is rare.
Taxes and Lawyers
Tax debt is one of the hardest situations to solve with Arizona State Bankruptcy law, as it cannot be easily absolved. You should speak with an Arizona Bankruptcy lawyer right away to see what your options are if you are suffering from high tax debt.
