Under the protection of federal bankruptcy laws, bankruptcy is a legal procedure that enables both people and organizations to get rid of or restructure their debts. The bankruptcy process is regulated in the United States by federal law, specifically the U.S. Bankruptcy Code. Here are some basic information on bankruptcy in Arizona:

Types of Bankruptcy

The most common types of bankruptcy filings in Arizona are Chapter 7, Chapter 11, and Chapter 13.

• Chapter 7: Liquidation bankruptcy allows individuals to eliminate most of their unsecured debts. Non-exempt assets are sold, with the earnings going toward paying creditors.
• Chapter 11: Typically used by businesses, this bankruptcy type allows for the reorganization of debt, giving businesses the opportunity to continue operations while repaying creditors over time.
• Chapter 13: This is intended for those who have a steady source of income and wish to restructure their debts so that they may repay them over the course of three to five years.

Bankruptcy During the Coronavirus Pandemic

In Arizona, the coronavirus (COVID-19) pandemic has significantly impacted the economy and caused financial hardship for many people and companies. Therefore, bankruptcy has emerged as a practical choice for individuals facing debt and financial difficulties in these unprecedented circumstances.

Here’s an introduction to bankruptcy during the coronavirus pandemic in Arizona:

1. Government relief measures. The state of Arizona implemented its own relief measures to provide financial support to people and businesses affected by the pandemic, in addition to federal relief programs like stimulus payments, increased unemployment benefits, and the Paycheck Protection Program (PPP) for small businesses. However, for some, these efforts may not be sufficient to escape bankruptcy.
2. Changes to bankruptcy laws. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed in March 2020, temporarily altered bankruptcy laws, making it easier for people and companies to declare bankruptcy during the pandemic. The CARES Act raised the debt ceiling for small businesses filing under the new Subchapter V of Chapter 11 and exempted certain pandemic-related financial assistance from being included as income for the purposes of the bankruptcy means test.
3. Impact on individuals. As a result of the pandemic, many Arizona residents experienced job losses, reduced hours, or other financial difficulties. Bankruptcy may give a chance to eliminate or restructure debt and provide a fresh financial start for people struggling to make payments and manage debt. However, before making a choice, it is critical to examine the long-term effects of bankruptcy, such as its impact on credit scores.
4. Impact on businesses. Numerous Arizona businesses, particularly those in industries strongly impacted by the pandemic (e.g., tourism, hospitality, and retail), have faced financial difficulties. Bankruptcy may provide these firms with the opportunity to restructure their debts, continue operations, or liquidate their assets and close down.

What You Need To Know Before Filing Bankruptcy in Arizona

Filing for bankruptcy in Arizona is a major decision that can provide debt relief but also comes with potential long-term consequences. Before you file, familiarize yourself first with some key aspects of bankruptcy in Arizona:

1. Bankruptcy types. Understand the distinctions that exist between Chapter 7 (liquidation), Chapter 11 (business reorganization), and Chapter 13 (individual debt restructuring) bankruptcies, as each has their own eligibility requirements, processes, and outcomes.
2. Means Test. You must pass the means test to qualify for Chapter 7 bankruptcy. This test evaluates your income and spending to confirm your eligibility. You could be forced to file under Chapter 13 instead, if your income is higher than the median income in Arizona.
3. Credit Counseling. You have 180 days before filing to finish a credit counseling course from an accredited agency. You’ll also need to finish a debtor education course after filing.
4. Non-dischargeable debts. There are some debts that cannot be eliminated through bankruptcy, including student loans, child support, alimony, and some tax obligations. Before filing, be sure to think about which of your debts qualify for discharge.
5. Bankruptcy alternatives. Look into bankruptcy alternatives including debt settlement, credit counseling, or negotiations with creditors as ways to handle your financial concerns without the long-term effects of bankruptcy.
6. Costs. Be mindful of the fees involved with declaring bankruptcy, such as filing, legal, and credit counseling costs.
7. Post-bankruptcy life. After filing for bankruptcy, create a strategy to restore your credit and handle your finances carefully. Start with making a budget, using secured credit cards to improve your credit, and routinely checking your credit report.

Should I File for Bankruptcy in Arizona?

Depending on your particular financial standing, intended goals, and circumstances, you must decide whether to file for bankruptcy in Arizona. When determining if filing for bankruptcy is the best option for you, keep the following things in mind:

1. Assess your financial situation. Consider your assets, liabilities, costs, and income. Bankruptcy could be an ideal option if your debts are too high for you to make minimal payments, or if you run the risk over wage garnishment, foreclosure, or repossession.
2. Consider bankruptcy alternatives. Examine options such as negotiating with creditors, debt settlement, or credit counseling before deciding to file for bankruptcy.
3. Type of debts. Bankruptcy may not offer you the relief you want if a substantial amount of your financial obligations are non-dischargeable (such as student loans, child support, alimony, and certain tax bills). For people with largely dischargeable debts, such as credit card and medical debts, bankruptcy is more advantageous.
4. Impact on credit. Depending on the type of bankruptcy filed, bankruptcy will lower your credit score and stay on your credit history for 7 to 10 years. As a result, it could be challenging to get fresh credit, rent an apartment, or even find employment at that time.
5. Exemptions. To learn which assets you can keep throughout the bankruptcy process, familiarize yourself with Arizona’s bankruptcy exemptions. If you can keep the majority of your assets safe, declaring bankruptcy could be a better choice.

In the end, the decision of filing for bankruptcy in Arizona should be taken after carefully weighing all of these variables and seeking legal advice.