Phoenix Legal Resource Blog
So, you’ve moved to Arizona recently, but you want to file a chapter 7 bankruptcy. Can you? As with every legal question, the answer is: “It depends.”
To file a chapter 7 bankruptcy in Arizona, you just need to have resided here for the majority of the past 180 days (91 days) before the filing date. Even though you can file your bankruptcy here in Arizona doesn’t always mean you can use Arizona exemptions.
When you file a bankruptcy, it creates a bankruptcy estate, which consists of everything that you own. State and federal law allows you to protect certain property from your creditors and from sale during the bankruptcy case. These laws are called exemptions.
In Arizona, the Arizona exemptions apply, as long as you have lived in Arizona for the last two years. There are also federal laws that protect things such as social security income, retirement accounts, and veteran’s benefits, among others.
It can be hard to make ends meet under normal circumstances. In Arizona, creditors can garnish up to 25% of your take-home pay, depending on the type of debt. If you’re already living paycheck to paycheck, wage garnishment be disastrous.
Luckily, filing bankruptcy can stop most garnishments. When you file your bankruptcy case, the bankruptcy court issues an order called the automatic stay, which stops creditors from initiating or continuing any action against you. Once the bankruptcy is filed, we notify your employer, and your employer will stop the garnishment.
It is rare for a person to lose a house in an Arizona chapter 7 bankruptcy case. That’s because the exemption for most people is $250,000 of your house’s equity (A.R.S. § 33-1101). If your home’s value, less any mortgages, is $250,000 or less, there’s a good chance you will get to keep your home. You do have to live in the house to claim the exemption.
Arizona law allows you to keep $300 in one bank account. A.R.S. § 33-1126(A)(9). This only applies to the day that your chapter 7 bankruptcy petition is filed. It is important to note that that the law does NOT allow you to just withdraw cash to get under the $300 limit and then deposit it
ARS § 33-1125(8) allows you to protect, “equity in one motor vehicle of not more than six thousand dollars. If the debtor or debtor’s dependent has a physical disability, the equity in the motor vehicle shall not exceed twelve thousand dollars.” If you are married, you can double this exemption and use it on the same car, or if you are a two-car family, use each exemption on a separate car.
When filing for Chapter 7 bankruptcy, you do have some options when it comes to your vehicle. If you are in good standing with the payments on the vehicle you are purchasing and would like to continue making payments, you may be able to enter into a reaffirmation agreement with your creditor. Bankruptcy exemptions for chapter 7 allow you to have up to $6,000 in equity for one motor vehicle or $12,000 if you are married.
Increasingly, fraudsters are posing as legitimate debt collectors or attorneys and offering to accept a discounted amount to settle valid debts. They call unsuspecting consumers and are convincing. They typically know your social security number, your address, the amount of the debt, and the name of the creditor. They will claim to be from an organization with an official-sounding name. They will send you official-looking documents to sign. And, after you’ve paid, the real debt collector will still be able to pursue you for the full amount owed.