Do I Qualify for Chapter 7 Bankruptcy in Arizona?

If you’re struggling with overwhelming debt, constant collection calls, or the threat of wage garnishment, you may be wondering if Chapter 7 bankruptcy is the right option for you. For many Arizona residents, Chapter 7 bankruptcy offers a fresh start by eliminating most unsecured debts—such as credit cards, medical bills, and personal loans.

However, qualifying for Chapter 7 is not just about financial hardship. Here’s what you need to know to determine if you’re eligible under Arizona law.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy—sometimes called “liquidation bankruptcy”—allows you to wipe out most types of unsecured debt. In return, you may have to surrender certain non-exempt property to be sold by a trustee to pay creditors.

Fortunately, most people who file for Chapter 7 in Arizona don’t lose anything, or very little, because the state’s exemption laws protect essential property like a reasonable vehicle, clothing, household items, and some equity in a home.

The Means Test: The First Step to Qualify

The most important requirement for Chapter 7 is passing the means test. This is a calculation based on your income, household size, and certain allowable expenses. Here’s how it works:

• Step 1: Compare your income to Arizona’s median income.
  If your household income is below the state median for similarly sized households even by a tiny margin, you automatically qualify.
• Step 2: If your income is above the median, you must complete a detailed analysis.
  This involves subtracting your expenses (within IRS guidelines) to determine your disposable income.

If your disposable income is too high, you may be required to file Chapter 13 instead, which involves a repayment plan over 3–5 years.

Arizona Median Income changes frequently over time, but you can consult with an attorney for updated figures to see where you compare.

Other Chapter 7 Eligibility Requirements

Even if you pass the means test, there are additional factors that can impact your eligibility:

• You cannot have filed Chapter 7 in the past 8 years.
• You must complete a credit counseling course from an approved provider within 180 days of filing.
• You must file in good faith. Bankruptcy courts may dismiss your case or deny a discharge for certain debts if they believe you're abusing the system (e.g., running up debts right before filing).

What Debts Are Discharged in Chapter 7?

Chapter 7 can eliminate many types of debt, including:

• Credit card balances
• Medical bills
• Personal loans
• Payday loans
• Utility bills

However, not all debts can be discharged. You generally cannot eliminate:

• Student loans (except in rare hardship cases)
• Child support and alimony
• Most tax debts
• Court fines or criminal restitution

Do You Have to Give Up Property?

Arizona has generous bankruptcy exemptions that protect much of your property. You may be able to keep:

• Up to $400,000 in home equity (if you’ve lived in Arizona long enough)
• A vehicle up to $15,000 in equity (or $25,000 if you have a disability)
• Personal property like furniture, clothes, appliances, and tools of the trade

Each case is unique, and an experienced Arizona bankruptcy attorney can help you understand exactly what is protected in your situation.

How Arsenal Law Helps You Qualify and File

At Arsenal Law, we know how intimidating it can be to consider bankruptcy. That’s why we walk you through every step—starting with a free consultation to determine if you qualify. We’ll calculate your means test, review your finances, explain your options, and protect your rights from start to finish.

Bankruptcy is a tool for recovery, not failure. It is used to rebuild your financial security. If Chapter 7 is right for you, we’ll help you use it the right way to get the fresh start you deserve.

Schedule a Free Consultation
Call us at 480-582-5228 or book online at arsenallawaz.com to find out if you qualify for Chapter 7 bankruptcy in Arizona.