Chapter 7 bankruptcy is one of the most effective ways to get financial freedom and begin immediate credit recovery. Our dedicated Chapter 7 bankruptcy attorney, Victoria Av, focuses exclusively on bankruptcy law—so you can feel confident knowing your case is in highly experienced and capable hands..
If you are ready for financial peace, call Stone Rose Law at (480) 739-2448 for a free consultation.
To qualify for relief under Chapter 7 bankruptcy in Arizona, you can be an individual, a partnership, a corporation, or another business entity.
However, federal bankruptcy law restricts who can use Chapter 7.
These limitations include whether you make too much income, whether you filed for bankruptcy in the recent past and it is too soon for you to file for Chapter 7 bankruptcy after the prior bankruptcy, and whether you have completed a required credit counseling course.
Whether you need to take the means test depends on how much income you make compared to the median income in your state.
In Arizona, for Chapter 7 petitions filed after November 1, 2024, the median annual income is:
| Annual Median Income | Median Monthly Income |
| $68,887 for one person | $5,740 |
| $83,027 for a two-person household | $6,919 |
| $99,961 for a family of three | $8,330 |
| $110,040 for a family of four | $9,170 |
For each additional family member after four, add $9,900 to the family of four amount above.
For example, for a family of five, $110,040 + $9900 = $119,940. Divide this by 12 to reach a median monthly income of $9,995.
The bankruptcy court will consider your average monthly income for the six months before you file your Chapter 7 petition.
If your monthly gross income during this period is below the median income level, then you do not need to pass the means test.
If your monthly income exceeds the state median, you must take the means test using Bankruptcy Form 122-A. This form considers your current monthly income, assets, and expenses to calculate whether you have enough money to pay your creditors.
If your monthly expenses exceed your monthly income, you will likely qualify for Chapter 7.
As long as you pass the means test, Chapter 7 relief is available no matter how much you owe. There is no minimum debt to file nor a debit limit.
If you do not pass the means test, then you will be ineligible to use Chapter 7, but you may still be eligible to file for Chapter 13 bankruptcy.
If you have filed for bankruptcy before, then you must meet an applicable waiting period before you can file for bankruptcy again. The waiting period to file for a subsequent Chapter 7 depends on the type of bankruptcy you used in the past:
If the bankruptcy court in your prior Chapter 7 case dismissed it before discharge, then a 180-day waiting period applies before you can petition for Chapter 7 again.
You cannot have your debts discharged under Chapter 7 unless you have completed an approved credit counseling course within 180 days before filing. At Stone Rose Law, we include all required courses are part of our services.
Most of your personal belongings are protected from Chapter 7 liquidation.
Protected items include:
Unprotected assets subject to possible liquidation may include:
The purpose of Chapter 7 bankruptcy is to discharge most or even all of your debts.
Chapter 7 is commonly known as “liquidation bankruptcy.” This is for two reasons:
In most situations, federal bankruptcy law and Arizona law allow you to exempt some assets from liquidation. These include your home and furniture, your car, and any retirement accounts you have, such as an individual retirement account or an employer’s 401(k) account.
Debts Chapter 7 can discharge include:
Note that if you discharge a secured debt, and the creditor has secured it with a legal device like a lien, then although Chapter 7 will discharge the debt itself, the lender’s security interest on your collateral will remain. This could result in repossession of the collateral after the bankruptcy discharge.
Chapter 7 Bankruptcy will not discharge some types of debts. These include:
Some debts may be dischargeable under Chapter 7 bankruptcy, but you must meet specific requirements to qualify. These include:
Lastly, in some situations, you may voluntarily remove a debt from being discharged in Chapter 7 bankruptcy by redeeming it or entering into a reaffirmation agreement with the creditor.
Eliminating some tax debts under Chapter 7 bankruptcy is possible if you meet all of the following requirements:
If you meet these five requirements, then your tax debt can be discharged. This discharge will also include any penalties and interest related to the tax debt.
However, if you do not meet all of these criteria, the tax debt will not be discharged.
Discharging a student loan is not necessarily easy under Chapter 7 bankruptcy, but it is not impossible, either. Student loans are automatically non-dischargeable.
To discharge a student loan in Chapter 7 bankruptcy, you must show that repaying the loan is causing you undue hardship. This is filed as an adversary case against the Department of Education. To do this, you must prove all of the following to the bankruptcy court:
Redemption is where you will pay a secured creditor what the collateral (e.g., your car) is worth instead of the actual loan balance. It is only available in Chapter 7 bankruptcy.
Property you can redeem includes any kind of household property, including an automobile, but it does not include real property or a mortgage.
To redeem an item of personal property, you must file a motion to redeem with the bankruptcy court. If the creditor objects to your motion to redeem, the court will hold a trial on the issue.
If you and the creditor agree on the motion, then you must also agree on the property’s actual market value.
Sometimes, this is easy to do. For a car’s market value, for example, the Kelley Blue Book is often an authoritative source to determine a car’s value.
If you and the creditor cannot agree on the property’s actual value, then the bankruptcy court will decide in an evidentiary hearing.
Once your motion to redeem is approved and the property’s actual value is set, you must pay the creditor for the property’s equitable value in cash. You cannot do this by monthly payments; payment must be a lump sum. Once you do this, you can discharge any balance you still owe as unsecured debt under your old financing arrangement with the creditor. If you do not have the cash available, some organizations will provide “redemption loans” to pay off the original creditor.
A reaffirmation agreement is a strictly voluntary agreement between a Chapter 7 bankruptcy debtor and a creditor that, for practical purposes, takes an item of personal property subject to secured financing outside of bankruptcy.
You must obtain court approval for a reaffirmation agreement.
What you are reaffirming in the agreement is that you will remain liable for your debt obligation.
This means that the reaffirmed debt will remain when your bankruptcy is closed and your other debts are discharged. You can keep possession of the property if you keep your payments current under the new agreement.
Reaffirmation agreements are used mainly with secured debts, meaning financing that puts a lien on the property as collateral.
Reaffirmation agreements are under special rules and are voluntary. They are not required by bankruptcy law or by any other law. Reaffirmation agreements:
Unsecured debts, like credit card balances, personal loan payments, and medical bills, are examples of unsecured debt and are usually not subject to reaffirmation agreements but discharged under Chapter 7 with no remaining personal liability on your part.
A reaffirmation agreement is not always a continuation of the terms of your original financing contract with a lender, although it often amounts to that. Under the reaffirmation agreement, you may have the opportunity to renegotiate your payment amounts and rate of interest on the loan, but the lender is under no obligation to offer you better terms.
You must enter into a reaffirmation agreement within 60 days after your first meeting with creditors, although the bankruptcy court can extend this period at its discretion.
You or the lender must file the agreement with the bankruptcy court. Once you sign the agreement, you have 60 days to change your mind and back out of it.
The Chapter 7 bankruptcy process typically takes four to six months to receive a discharge—an order that prohibits creditors from attempting to collect on discharged debts. However, the case may remain open longer if there are assets that need to be liquidated by the trustee or if information is needed
Before you file, you will need to prepare. This involves gathering documentation to support your petition and completing the approved credit counseling course no more than 180 days before filing.
A few of the supporting documentation includes:
The petition for Chapter 7 bankruptcy is a packet of several bankruptcy forms. Some general and some specific to the state of Arizona’s bankruptcy court.
In the petition, you identify your assets and declare any of them exempt from liquidation under Chapter 7. This is also where you include information from the preparatory stage above, like your unsecured debts, assets, income, and spending.
Your attorney will complete the bankruptcy paperwork.
When you file the petition with the court, you must pay the required filing fee under 28 United States Code Section 1930. The local rules of the Arizona bankruptcy court allow you to apply to pay the fee in installments.
Immediately following a bankruptcy filing, an automatic stay will go into effect that requires creditors to stop all collections activities, including phone calls, foreclosure, wage garnishment, and repossession efforts. The automatic stay also applies to the government collecting past-due income tax amounts.
Although it will prevent the IRS and state tax authorities from harassing you, the bankruptcy automatic stay still allows the following activities:
Once you file the Chapter 7 bankruptcy petition and pay the required fee, the next step is for the bankruptcy court trustee to set a meeting with creditors, also known as a 341 Meeting.
This usually happens 30 to 45 days after the petition filing date. During this period many petitioners take the opportunity to complete another required financial management course.
After the meeting of creditors, a waiting period applies during which:
This period takes up to 60 days.
If no creditor objects to the petition, the court can take up to another 15 days to discharge your debts and close your case.
When you add up the time periods above, the ordinary process takes 120 days, or the equivalent of four months.
If you have many kinds of assets that need to be sorted out to identify those that can be liquidated and those exempt from liquidation, this can delay the timeline.
Other factors that can contribute to delays in processing a Chapter 7 bankruptcy case include:
In Arizona, you can find filing fees for the U.S. Bankruptcy Court on its website. The filing fees page lists many kinds of fees, depending on various legal filings and other actions. Here are some of the more relevant ones as of December 1, 2023:
Once you decide to file bankruptcy, we provide a wide range of legal services to help you eliminate debt. Here’s how we do it:
Before we declare bankruptcy, we will gather information about your financial situation to discuss which debts you can eliminate or restructure. We also provide legal counsel on how to achieve the best debt relief.
Our bankruptcy attorney can help you decide whether a Chapter 7 or Chapter 13 bankruptcy is your best route.
Our legal team handles your case from start to finish.
We complete and process all the paperwork, communicate with all parties, and ensure the case runs smoothly. Whether you’re declaring Chapter 13 or Chapter 7 bankruptcy, we take the burden out of the bankruptcy process.
If you don’t know what you’re doing, you can make many mistakes when discussing your case with a bankruptcy trustee, judge, or debt collectors.
Our experienced bankruptcy attorney knows how to engage all parties to help you discharge as much debt as possible. We negotiate with creditors on your behalf and provide proper legal representation at the 341 meeting of creditors.
Our consultation work doesn’t end once your bankruptcy case is filed. We can also:
Protect your financial future now.
Contact our Arizona bankruptcy lawyers and let us help you with your debt settlement strategy today. Whether you have tax debt, car loans, medical bills, or unsecured debt, we provide debt relief with reasonable attorney fees so that you can start over and move on.
Fill out our online form or call Stone Rose Law at (480) 739-2448 for a free consultation with our experienced Arizona bankruptcy attorney.
