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Arizona lawmakers understand that there are times when everyone struggles with their outstanding debt.

Arizona Bankruptcy Laws

If you’re facing overwhelming debt, constant creditor calls, or the threat of foreclosure or repossession, you are not alone. Thousands of Arizonans face serious financial challenges every year. For many, bankruptcy offers a legal and powerful solution to get a fresh start.

At Hilltop Law Firm, we understand how difficult it can be to face these decisions. We’re here to walk you through the process with honesty, empathy, and professional guidance. This comprehensive guide explains how bankruptcy works in Arizona, the key differences between Chapter 7 and Chapter 13, and what to expect if you’re considering filing.

Hilltop Law Firm is the way to go when filing for bankruptcy. Attorney Cy Hainey and his support staff did an outstanding job in keeping me on track. I highly recommend them.”
- Morris C.

Which Is the Best Option for You: Chapter 7 vs. Chapter 13

When it comes to filing for bankruptcy in Arizona, most individuals choose between Chapter 7 and Chapter 13. Each chapter serves different financial situations and goals, and the right choice depends on your income, debt structure, assets, and what you hope to achieve through the bankruptcy process.

Chapter 7: A Fresh Start Through Liquidation

Chapter 7 bankruptcy is often referred to as liquidation bankruptcy. It’s designed to quickly discharge most unsecured debts, including credit cards, medical bills, utility bills, and personal loans. The process is relatively fast, typically taking about four to six months from filing to discharge, and does not involve a repayment plan.

To qualify for Chapter 7, you must pass the means test, which compares your income to the median income for a household of your size in Arizona. If your income falls below this threshold, you are eligible. If it is above, you may still qualify based on deductions for necessary living expenses. This test ensures that Chapter 7 remains available to those who truly cannot afford to repay their debts.

One of the major considerations with Chapter 7 is asset protection. Arizona has generous state exemptions that allow most filers to keep essentials like their home (up to $150,000 in equity), a vehicle (up to $6,000 in equity), household furnishings, and retirement accounts. However, any non-exempt property may be sold by the bankruptcy trustee to help repay creditors. In many cases, filers have no non-exempt assets and lose nothing, but it’s a risk that needs to be reviewed carefully with your attorney.

Chapter 7 is best for people who:

Have low to moderate income
Are dealing with mostly unsecured debt
Don’t have significant assets that exceed exemption limits
Want a fast and clean financial reset without a long-term payment plan

It’s important to know that Chapter 7 does not discharge student loans, most tax debts, child support, alimony, or criminal restitution. These obligations will remain even after your case is closed.

Chapter 13: A Structured Repayment Plan

Chapter 13 bankruptcy is also known as wage earner’s bankruptcy or reorganization bankruptcy. This option is ideal for individuals who have a steady income and want to repay some or all of their debt over time while keeping their property, including non-exempt assets.

Under Chapter 13, you’ll propose a repayment plan lasting three to five years. The amount you repay depends on your disposable income, the types of debt you owe, and how much property you own that exceeds exemption limits. During the repayment period, you make monthly payments to a bankruptcy trustee, who distributes the funds to your creditors. At the end of the plan, any remaining eligible debts are discharged.

Chapter 13 is especially helpful if you’re:

Behind on your mortgage or car loan and want to catch up to avoid foreclosure or repossession.
Carrying significant tax debt or child support arrears that cannot be discharged but can be paid off over time.
Ineligible for Chapter 7 due to income or means test results.
Seeking to protect valuable assets that would be at risk in Chapter 7.

Another advantage of Chapter 13 is that it can stop foreclosure and allow you to spread missed mortgage payments over the length of your repayment plan. This can be a lifeline for homeowners who have fallen behind but want to save their homes.

Making the Right Choice

Choosing between Chapter 7 and Chapter 13 is not a decision to make lightly. Here are a few guiding questions to help you start thinking about which chapter might be right for you:

Do you have a regular, reliable source of income?
Are you trying to stop a foreclosure or repossession?
Do you have assets you want to protect that exceed Arizona’s exemptions?
Is your debt primarily unsecured (like credit cards and medical bills), or do you have secured debts (like a mortgage or car loan) that you’re trying to keep current?
Do you need relief from tax debts or domestic support obligations?

You Don’t Have to Face This Alone | Hilltop Law Firm | (602) 466-9631

How to File for Bankruptcy in Arizona

Step 1: Speak with a Bankruptcy Lawyer

The two most common types of consumer bankruptcy are Chapter 7 and Chapter 13. Choosing the right chapter depends on your income, assets, and financial goals. A bankruptcy attorney can help you determine the best fit for your situation.

Step 2: Complete Credit Counseling

Before filing, you must complete a credit counseling course through an agency approved by the U.S. Trustee Program. This course must be taken within 180 days before filing your bankruptcy petition. Once complete, you’ll receive a certificate to include with your filing.

Step 3: Gather Financial Documents

To prepare your case, you’ll need detailed information about your:

Income and employment
Debts and creditors
Assets and property
Monthly expenses
Tax returns (typically the last two years)

This information is essential for accurately completing your bankruptcy forms.

Step 4: File Your Bankruptcy Petition

Once your documents are ready, your attorney can file your petition and schedules with the U.S. Bankruptcy Court for the District of Arizona. Filing automatically triggers an automatic stay, which stops most collection activities, wage garnishments, and foreclosure efforts.

Step 5: Attend the 341 Meeting of Creditors

Roughly 30 days after filing, you’ll attend a 341 meeting, also known as the “Meeting of Creditors.” This brief meeting is conducted by a bankruptcy trustee, not a judge, and gives the trustee and creditors an opportunity to ask basic questions about your financial situation.

Step 6: Complete Debtor Education

Before your debts can be discharged, you must complete a second course in financial education. Like the credit counseling course, this must be completed through an approved provider.

Step 7: Receive Your Discharge

If everything goes smoothly:

In Chapter 7, you’ll typically receive your discharge in 3–6 months.
In Chapter 13, your discharge comes after you complete your 3–5 year repayment plan.

A discharge means your eligible debts are legally wiped out and you’re no longer obligated to pay them.

How Much Does It Cost to File Bankruptcy in Arizona?

Filing Fees

Chapter 7: $338
Chapter 13: $31

Credit Counseling & Education Courses

Usually between $20–$100 total, depending on the provider.

Legal Fees

At Hilltop Law Firm, we offer flexible payment plans, and we will always be upfront about fees before you commit. Call (602) 466-9631 to schedule your free consultation with Cy Hainey to learn more today.

Utilize the Laws of Bankruptcy in Arizona to Your Advantage

If you are having difficulties making your monthly credit card payments, mortgage payments, or paying an outstanding vehicle note, then filing for bankruptcy may help you with your stress and your finances. Bankruptcy can lead to a discharge of debt, but in many cases, consumers have other options besides bankruptcy that may offer the needed relief to get their finances back on track.

Hilltop Law Firm can help you understand and utilize the laws of bankruptcy in Arizona to your advantage. Mr. Hainey can go over your debt with you so that you can make an informed decision on whether filing bankruptcy will provide the needed relief in your own financial situation. Call (602) 466-9631 today to discuss your matter.

How Does Bankruptcy Work in Arizona?

Bankruptcy is a legal process that allows you to either eliminate debt or repay it over time under court supervision. Once you file, an automatic stay is immediately issued, which legally stops:

Collection calls
Lawsuits
Wage garnishments
Repossession efforts
Foreclosure proceedings

2005 Bankruptcy Abuse Prevention and Consumer Protection Act

This act requires all individual debtors who file for bankruptcy on or after October 17th, 2005, to receive credit counseling. The credit counseling must begin within six months prior to filing for bankruptcy relief. The credit counseling course also includes studying financial management after bankruptcy has been formally filed.

Also, under the 2005 Bankruptcy Act, an applicant’s income and expenses are studied to decide if they’re eligible to file for Chapter 7 bankruptcy or if Chapter 13 bankruptcy must be filed.

The analysis of the test will review the average income of an applicant for the 6 months immediately prior to filing, which will then be compared to the median income for Arizona. If the study reveals a level of income below the median, Chapter 7 will likely be an option.

In situations where income exceeds the median income for Arizona, more elements of the means test will be evaluated to determine if Chapter 7 can be filed or if the applicant must file Chapter 13 bankruptcy.

Your Rights Under Arizona Wage Garnishment Laws

Mirroring federal laws, Arizona wage garnishment laws provide identical protections for citizens, limiting the amount that creditors can garnish from their paychecks.

With only non-exempt wages accessible to creditors for garnishment, there are also strict limits in Arizona on how much can be garnished per paycheck.

Understanding How Wage Garnishment Works

Wage garnishments, referred to as wage attachments in some cases, are orders from a court or government agency that require your employer to withhold a specific amount of money per check, sending it instead directly to the creditor.

When Do Creditors Get To Garnish Wages?

Before garnishing your wages, most creditors must obtain a court judgment that indicates you owe them money. Simply falling behind on payments to a creditor does not warrant wage garnishment until the creditor files a lawsuit and gets a judgment in court.

The following types of debt are exempt from this rule and can garnish wages without a judgment: Court-ordered child support Student loan defaults Unpaid income tax

Wage Garnishment Laws in Arizona

Though states can impose their own laws on wage garnishment limits, Arizona’s are exactly the same as Federal wage garnishment laws.

Creditors are only allowed to take the lesser of the following:

25% of Non-Exempt Weekly Earnings
Amount of Non-Exempt Earnings that exceed 30 times the federal minimum wage

The wages that remain after an employer has made the required deductions are referred to as “Disposable Earnings”.

Termination of Employment Due To Wage Garnishment

Hand holding stack of hundred dollar bills

Arizona wage garnishment laws dictate that an employer cannot fire their employee because of a child support wage garnishment. Rehires, returning employees or new hires are sometimes required to disclose their child support withholding status, but hiring or firing cannot be based on this information.

Bank Levy Laws in Arizona

A bank levy grants the creditor the right to take money from the bank account of a debtor and apply these funds to the balance of a judgment.

Under Arizona Title 25 – Chapter 5 – Article 1 25-521, the state of Arizona allows bank levies for family support.

In the event of a court-ordered judgment, the department may issue a levy and collect the full amount owed. Arizona bank levy laws also allow collection on all property and rights to property, not including exemptions under federal and state laws.

Arizona Title 23 – Chapter 4 – Articles 5 23-752 and 23-755 allow for the seizure of personal property as well as wages under Arizona bank levy laws.

Lien Laws in Arizona

Liens are claims on property after a judgment has given a creditor the right to do so. Having a lien placed on your property in Arizona will make it difficult to sell or refinance your house. If the equity in your home exceeds the homestead exemption, creditors may attach a judgment to the non-exempt equity in your property.

What To Do If You Have A Judgment Against You

In Arizona, having a judgment against debt owed to a creditor can drastically impact your financial health. One adverse effect of receiving an adjustment comes by way of wage garnishment, as detailed above. Often, creditors that hold a judgment against an Arizona resident will seek to garnish their bank accounts towards the balance of a debt.

There are a variety of options available to Arizona citizens who currently have a creditor judgment.

Motion To Vacate the Judgment

Arizona Rules of Civil Procedure dictate a process to remove a judgment, provided that there are grounds for doing so. Because most debt-driven judgments happen because of default by the debtor, it often becomes unclear if a proper notice of lawsuit had been given. There are situations that happen where a debtor was never properly served regarding the lawsuit in question.

Debtors are expected to explain why they waited to file a motion (excusable neglect) and provide a defense to the lawsuit if able. Other situations that are grounds for setting a judgment aside include fraud and lack of jurisdiction. To determine how likely success will be achieved on such motion, it’s recommended that you speak with an experienced Phoenix debt relief attorney regarding the judgment.

At Hilltop Law Firm, our free consultation service can evaluate such a motion.

Settling Judgments

Though it may seem simple, settling a judgment can be more complicated than it appears. With a multitude of elements factoring into any judgment, debtors must fully understand their judgment and the conditions granted upon settling.

Before settling any judgment, several facts regarding the case must first be answered, which typically can be best handled by an experienced attorney. Remember, a judgment that has already entered some form of garnishment can be extremely hard to settle. Many creditors may be unwilling to settle the judgment once garnishment of wages has started.

With a lack of options, many debtors find filing bankruptcy to be the best form of relief from a judgment in Arizona when unable to easily pay the full amount owed to the creditor.

A Word On Foreclosures In Arizona

Arizona foreclosure law affords citizens several provisions that may assist in preventing the seizure of their home or investment property. Most foreclosures that happen in Arizona take place outside of court (nonjudicial), rather than in instances where lenders file a lawsuit to foreclose on a home.

Know Your Rights In Arizona

You may be able to avoid bankruptcy altogether, and even keep your property in the process. Call (602) 466-9631 and talk to Cy T. Hainey at Hilltop Law Firm. They can give you a clearer picture of your options, with the possibility of avoiding bankruptcy, wage garnishment, and foreclosure altogether.

Reach out to a Phoenix bankruptcy lawyer at Hilltop Law Firm for a 100% FREE zero-obligation consultation.

Arizona Bankruptcy Lawyer

Arizona Bankruptcy Laws

Which Is the Best Option for You: Chapter 7 vs. Chapter 13