Arizona bankruptcy laws combine federal procedure with state-specific property protections: you file under the federal Bankruptcy Code (Chapter 7 or Chapter 13), but because Arizona has opted out of the federal exemption package, the Arizona Revised Statutes decide what you keep. Those state protections are more generous than most filers expect, starting with a $400,000 homestead exemption.
Chapter 7 or Chapter 13
Chapter 7 liquidates your non-exempt assets to pay creditors and wipes out the remaining qualifying debt. The case typically closes about four months after filing.1United States Courts. Discharge in Bankruptcy It fits filers with limited income, few non-exempt assets, and mostly unsecured debt such as credit cards and medical bills.
Chapter 13 is a court-supervised repayment plan running three to five years instead of a liquidation. If your income is below Arizona’s median for your household size, the plan runs three years; above the median, generally five.2United States Courts. Chapter 13 – Bankruptcy Basics It’s the right tool if you’re behind on a mortgage or car loan and want to catch up while keeping the collateral, and it’s often the only option if your income disqualifies you from Chapter 7.
The Means Test
Chapter 7 isn’t automatically available. The means test compares your household income to Arizona’s median for your family size, with figures the U.S. Trustee Program updates periodically using Census data; the most recent update took effect April 1, 2026.3United States Department of Justice. Means Testing Below the median, you qualify.
Above the median, the court subtracts allowable living expenses (housing, transportation, food, and other necessities under IRS standards) from your monthly income. What’s left is your “disposable income.” If that figure, projected over five years, would let you repay a meaningful portion of your unsecured debt, the court presumes your Chapter 7 is abusive and can dismiss it or convert it to Chapter 13.4Office of the Law Revision Counsel. 11 US Code 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13 You can rebut the presumption only with special circumstances like a serious medical condition or a call to active military duty.
Residency and Pre-Filing Steps
You can file in Arizona if your home, principal business, or main assets have been in the state for the majority of the 180 days before filing — about 91 days minimum.5Office of the Law Revision Counsel. 28 US Code 1408 – Venue of Cases Under Title 11 Federal law also requires a credit counseling briefing from a U.S. Trustee-approved nonprofit within 180 days before you file.6Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor Most agencies offer it online or by phone for roughly $10 to $50, and the DOJ maintains a searchable list by state.7United States Department of Justice. List of Credit Counseling Agencies Approved Pursuant to 11 USC 111 Your federal tax returns for the last four periods must also be current, or the trustee can seek dismissal.8Internal Revenue Service. Declaring Bankruptcy
What Property You Keep: Arizona Exemptions
Arizona has opted out of the federal exemption system, so state law alone governs what stays out of your bankruptcy estate.9Arizona Legislature. Arizona Revised Statutes 33-1133 – Other Exemption Laws In a joint filing, each spouse can usually claim a separate set of exemptions on assets they individually own and use, which effectively doubles the protection. Several of these limits now adjust annually for inflation, so the base figures below may have ticked up.
Homestead
Up to $400,000 of equity in your primary residence is protected, covering houses, condominiums, cooperatives, mobile homes, and similar dwellings you actually live in. Only one homestead exemption applies per married couple or single person.10Arizona Legislature. Arizona Revised Statutes 33-1101 – Homestead Exemptions, Persons Entitled to Hold Homesteads, Annual Adjustment Renters can exempt up to $2,000 in prepaid rent and security deposits instead.11Arizona Legislature. Arizona Revised Statutes 33-1126 – Money Benefits or Proceeds, Exception
Motor Vehicle
Up to $15,000 of equity in one motor vehicle is protected, rising to $25,000 if you or a dependent has a physical disability.12Arizona Legislature. Arizona Revised Statutes 33-1125 – Personal Items Both amounts adjust annually for cost of living starting in 2024. Spouses filing jointly who each own and use a separate vehicle each claim their own exemption.
Household Goods
Furniture, appliances, electronics, and other household goods you personally use are exempt up to a combined fair market value of $15,000, with annual inflation adjustments.13Arizona Legislature. Arizona Revised Statutes 33-1123 – Household Furniture, Furnishings and Appliances, Annual Adjustment Clothing and watches have their own limits under A.R.S. § 33-1125, separate from the household goods cap.
Tools of the Trade
If you’re self-employed or work in a trade, up to $5,000 in tools, equipment, instruments, books, and related intangible assets like client lists and websites is exempt. Farmers whose primary income is from farming can exempt up to $2,500 in farm machinery, implements, feed, seed, and animals.14Arizona Legislature. Arizona Revised Statutes 33-1130 – Tools and Equipment Used in a Commercial Activity, Trade, Business or Profession
Cash and Bank Accounts
Up to $5,000 in a single account at any one financial institution is exempt, with annual cost-of-living adjustments.11Arizona Legislature. Arizona Revised Statutes 33-1126 – Money Benefits or Proceeds, Exception Certain deposited income is fully exempt regardless of balance: Social Security, veterans benefits, unemployment compensation, workers’ compensation, child support, spousal maintenance, and disability or accident insurance proceeds.
Retirement Accounts
Qualified retirement plans under federal tax law — 401(k)s, 403(b)s, traditional and Roth IRAs, and Section 457 deferred compensation plans — are protected with no stated dollar cap.11Arizona Legislature. Arizona Revised Statutes 33-1126 – Money Benefits or Proceeds, Exception Arizona’s protection is broader than the federal alternative because it also covers inherited IRAs. One catch: contributions made to an IRA within 120 days before filing are not exempt.
Life Insurance and Annuities
The cash surrender value of a life insurance policy is exempt if you’ve owned the policy for at least two continuous years and the beneficiary is a spouse, child, parent, sibling, or other dependent family member. A similar two-year ownership rule applies to annuity contracts.11Arizona Legislature. Arizona Revised Statutes 33-1126 – Money Benefits or Proceeds, Exception
The Community Property Wrinkle
Arizona is a community property state, and that changes the math for married filers. When one spouse files alone, all community property (assets acquired during the marriage by either spouse) enters the bankruptcy estate, even property titled solely in the non-filing spouse’s name. A creditor of one spouse can reach community assets both spouses rely on.
Filing jointly often makes more sense in Arizona because both spouses claim their full exemption sets and discharge community debts in one case. If only one spouse carries significant separate debt (debt from before the marriage or through inheritance), an individual filing may protect the other spouse’s separate property. The choice can cost or save a household thousands, and it’s worth settling before you file.
Debts That Survive Bankruptcy
Bankruptcy doesn’t erase everything. Federal law exempts specific categories from discharge in both Chapter 7 and Chapter 13.15Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge
- Child support and alimony are never dischargeable.
- Most recent income taxes, payroll taxes, and sales taxes survive. Older income tax debt may be dischargeable if the return was due more than three years ago, was filed at least two years ago, and the tax was assessed at least 240 days before filing.
- Student loans are presumed non-dischargeable unless you file a separate adversary proceeding and prove undue hardship under a stringent test. Success is uncommon but not impossible.
- Debts obtained through false statements, and debts from willful and malicious injury to another person or their property, survive.
- Liabilities for death or personal injury caused by operating a vehicle while intoxicated are not dischargeable.
- Criminal fines, traffic tickets, and other government penalties stay.
- A creditor you fail to list may keep their claim if they didn’t otherwise learn of your case in time.
Recent spending gets extra scrutiny. Consumer debts for luxury goods over $500 incurred within 90 days of filing, and cash advances over $750 taken within 70 days, are presumed non-dischargeable.15Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge Loading up credit cards before filing is the kind of move that invites an objection.
Filing, the Automatic Stay, and the 341 Meeting
You file at the U.S. Bankruptcy Court for the District of Arizona, which has offices in Phoenix, Tucson, and Yuma. Filing fees are $338 for Chapter 7 and $313 for Chapter 13. If your household income is below 150 percent of the federal poverty guidelines, you can apply for a fee waiver or pay in installments.
The moment the petition is filed, the automatic stay kicks in and stops most collection activity: wage garnishments, creditor lawsuits, foreclosure sales, and collection calls all halt.16Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay Creditors who violate the stay can face sanctions.
Within 21 to 40 days after filing, you’ll attend a Meeting of Creditors (the 341 meeting). A court-appointed trustee reviews your documents and asks questions under oath about your finances and the accuracy of your schedules. Creditors are invited but rarely appear in consumer cases. If your paperwork is in order, the meeting typically runs 10 to 15 minutes.
Before discharge, you also have to complete a financial management course from an approved provider — separate from the pre-filing credit counseling. In Chapter 7, the certificate is due within 60 days after the date first set for the 341 meeting; in Chapter 13, before your final plan payment. Miss it and your case can close with no discharge, wasting the filing fee and effort.1United States Courts. Discharge in Bankruptcy
Discharge and Credit Impact
Chapter 7 discharges typically land about four months after filing. Chapter 13 discharges come after you finish all plan payments, so three to five years depending on plan length.1United States Courts. Discharge in Bankruptcy
A Chapter 7 bankruptcy stays on your credit report for 10 years from the filing date. A Chapter 13 filing remains for seven. During that window, expect effects on new credit, rental applications, and some employer background checks. Many filers see meaningful credit score recovery within two to three years by building positive payment history, and what you do after filing matters more than most people realize.