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Arizona Bankruptcy Lawyer

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Individuals and organizations that are unable to pay their creditors have the option to use bankruptcy to settle their debts. Creditors may file a bankruptcy petition against a debtor, also called involuntary bankruptcy, in an effort to recoup a portion of what they are owed.

The primary purpose of bankruptcy is to relieve a debtor of most debts and repay creditors in an orderly manner to the extent that the debtor has the means to do so. Bankruptcy allows debtors to be discharged from the legal obligation to pay most debts.

A bankruptcy case is initiated by the filing of a petition, which contains the debtor's financial information. Bankruptcy cases are always filed in United States Bankruptcy Court an adjunct to the U.S. District Courts. However, these cases are often highly dependent upon state law, particularly with respect to the validity of claims and exemptions.

The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. In Chapter 7, a debtor surrenders his or her non-exempt property to a bankruptcy trustee, who then liquidates the property and distributes the proceeds to the debtor's unsecured creditors. In exchange, the debtor is generally entitled to a discharge of debt, except when there is evidence of concealment or fraud. In Chapter 13, the debtor retains ownership and possession of all of his or her assets, but must devote some portion of his or her future income to repaying creditors, generally over a period of three to five years. The debtor is protected from most lawsuits, wage garnishments, or attempts to compel payment during the bankruptcy proceeding. Wages and pensions such as tax exempt retirement accounts are exempt, as well as unemployment compensation and workers' compensation. Insurance and certain tools of the trade tools, machines, books, etc are also exempt.

In Arizona, there are certain bankruptcy exemptions, which is a list of the kinds and values of property that creditors or bankruptcy trustees are legally unable to reach. The debtor is allowed to keep the property that is considered exempt, and what is exempt and the amount that is exempt varies from state to state. Some of these exemptions include the homestead, which is exempt up to $150,000, and it includes apartments and mobile homes. Personal property such as wrongful death awards, funeral deposits of up to $5,000, food and fuel for six months, furniture and furnishings and home appliances up to $4,000 are all exempt. A motor vehicle is exempt up to $5,000, as well as personal effects, such as clothing, weddings rings and bibles.

Federal bankruptcy laws were amended in 2005 to require a means test calculation to determine if a person can file Chapter 7 bankruptcy. If household income exceeds the state median income for a family of four, which, in Arizona, is $61,102, a person can still file Chapter 7.

Bankruptcy is a complicated legal matter and the use of an attorney is highly recommended. There are an estimated 261 bankruptcy attorneys in Arizona who can be found through the State Bar of Arizona at http://www.azbar.org. For those who really can't afford a lawyer, there are sources of free help through the Arizona Bar.

In 2008, a cumulative 19,145 residents of Arizona filed for bankruptcy, with 19 percent filing for Chapter 13 and 81 percent filing for Chapter 7. This number may only grow as financial situations worsen, and people will need help getting through it and moving on to the recovery process.