Filing bankruptcy in Arizona means using federal chapters — Chapter 7 or Chapter 13 — combined with Arizona’s own property exemptions, because the state has opted out of the federal exemption system. Arizona bankruptcy laws protect up to $400,000 of home equity and $15,000 of vehicle equity, shield most retirement accounts, and pull community property into the estate when a married person files alone. What you keep, how long the case takes, and whether you qualify for a straight liquidation all depend on how those pieces fit your situation.
Chapter 7 or Chapter 13
Chapter 7 liquidates nonexempt assets, discharges most unsecured debts, and closes in roughly three to four months. Chapter 13 keeps your property intact but puts you on a court-supervised repayment plan lasting three to five years before the remaining qualifying balances are discharged.
Plan length in Chapter 13 tracks your income. Below Arizona’s median for your household size, the plan runs three years unless the court approves longer. Above the median, you commit to five years. No Chapter 13 plan can stretch past five years.1United States Courts. Chapter 13 – Bankruptcy Basics
Chapter 7 is faster and wipes debts outright, but you risk losing anything not covered by an exemption. Chapter 13 lets you catch up on missed mortgage or car payments through the plan without surrendering property. The right choice turns on income, the mix of debts, and how much nonexempt property you own.
Who Qualifies for Chapter 7
Chapter 7 eligibility runs through the means test. Average your gross monthly household income over the six months before filing, annualize it, and compare it to Arizona’s median for your household size. Fall below the median and you pass without further calculation.2United States Bankruptcy Court. What Is the Chapter 7 Means Test
As of April 1, 2026, Arizona’s median income figures are:
- 1 earner: $73,935
- 2-person household: $89,027
- 3-person household: $104,965
- 4-person household: $121,174
Add $11,100 for each additional household member beyond four.3U.S. Trustee Program. Census Bureau Median Family Income By Family Size
Over the median, the test moves to a second phase that subtracts standardized living expenses published by the U.S. Trustee Program. The allowances vary by county, so Phoenix-area filers get higher housing figures than those in rural counties. If disposable income after those deductions is low enough, Chapter 7 is still available. If not, the case either converts to Chapter 13 or faces dismissal for abuse.
What You Keep: Arizona Exemptions
Because Arizona has opted out of the federal exemption scheme, state exemptions govern what stays out of the trustee’s reach.4Arizona Legislature. Arizona Revised Statutes 33-1133 – Other Exemption Laws Several of these amounts adjust for inflation each January 1, so the base figures below may run slightly higher when you file.
Homestead
Up to $400,000 in equity in your primary residence is exempt, whether that’s a house, condo, cooperative, or mobile home.5Arizona Legislature. Arizona Revised Statutes 33-1101 – Homestead Exemptions, Persons Entitled to Hold Homesteads, Annual Adjustment A married couple sharing a home gets one $400,000 exemption between them, not two. If equity sits at or below the cap on the filing date, the whole property is exempt, and any appreciation during the case stays protected.
Vehicles and Personal Property
Under A.R.S. § 33-1125, Arizona protects specific categories of personal items:
- Motor vehicle equity up to $15,000, or $25,000 if you or a dependent has a physical disability6Arizona Legislature. Arizona Revised Statutes 33-1125 – Personal Items
- Clothing up to $500
- Wedding and engagement rings up to $2,000
- Firearms up to $2,000
- Computer, bicycle, or sewing machine up to $2,000 combined
- Musical instruments up to $400
- Prosthetic devices and wheelchairs, fully exempt
- Domestic animals and household pets, fully exempt
Household furniture, appliances, and electronics used by you or your dependents are separately protected up to $15,000 in total fair market value.7Arizona Legislature. Arizona Revised Statutes 33-1123 – Household Furniture, Furnishings and Appliances, Annual Adjustment
Tools of the Trade and Cash
If you rely on specialized equipment for work, up to $5,000 in tools, instruments, books, and related business assets is exempt, including intangibles like client lists and domain names. A vehicle used mainly for commuting doesn’t qualify.8Arizona Legislature. Arizona Revised Statutes 33-1130 – Tools and Equipment Used in a Commercial Activity, Trade, Business or Profession You can also protect up to $5,000 held in a single bank account at one financial institution, and that figure adjusts annually.9Arizona Legislature. Arizona Revised Statutes Title 33 Property 33-1126 – Money, Benefits or Proceeds, Exception
Retirement Accounts
Most retirement savings are fully protected: 401(k) plans, traditional and Roth IRAs, 403(b) plans, and government deferred compensation plans under IRC § 457. Life insurance proceeds, disability benefits, and unemployment benefits also fall under A.R.S. § 33-1126.10Arizona Legislature. Arizona Revised Statutes 33-1126 – Money Benefits or Proceeds, Exception One caveat: contributions made within 120 days before filing are not exempt, so last-minute deposits to shelter cash won’t survive scrutiny.
Doubling for Joint Filers
Spouses who file jointly can each claim a full set of personal property exemptions, effectively doubling most caps. Joint filers protect $15,000 per spouse in vehicle equity, for example. The homestead is the exception: married couples share the single $400,000 cap whether they file together or separately.
Community Property Changes the Picture for Married Filers
Arizona is a community property state, and that reshapes an individual filing. When one spouse files alone, community property still becomes part of the bankruptcy estate under federal law.11Office of the Law Revision Counsel. 11 USC 541 – Property of the Estate Jointly held bank accounts, vehicles titled to both spouses, and other marital property fall within the trustee’s reach even if only one spouse’s name is on the petition.
The automatic stay does extend to community property against creditors of either spouse, which gives the non-filing spouse some cover. Separate property owned before marriage or received as an individual gift or inheritance stays outside the estate. Couples with significant shared debts often benefit from filing jointly so both discharge the community obligations. This is one of the more consequential decisions in an Arizona case and deserves careful thought before the petition goes in.
Debts That Survive a Discharge
Bankruptcy erases most unsecured debt, but federal law keeps several categories collectible after the case closes.12Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
- Child support and alimony are never dischargeable.
- Government-backed and qualified private student loans survive unless you prove undue hardship, a difficult standard.
- Income taxes generally need to be at least three years old, with timely filed returns, to qualify.13Internal Revenue Service. Declaring Bankruptcy
- Debts from fraud, misrepresentation, false financial statements, or embezzlement stay.
- Debts for death or personal injury caused by driving while intoxicated cannot be eliminated.
- Criminal fines and most government penalties survive.
- Debts carried forward from a prior case where a discharge was denied remain owed.
Two timing traps catch filers off guard: luxury purchases over $500 within 90 days of filing, and cash advances over $750 within 70 days. Both are presumed nondischargeable, so loading up credit cards before filing backfires.
Filing and the Automatic Stay
Before filing, you must complete a credit counseling session with a U.S. Trustee-approved agency within the 180 days leading up to your petition. Filing without that certificate leads to dismissal.14United States Bankruptcy Court. Credit Counseling Warning
The petition and its schedules lay out everything you own, everyone you owe, your income, and your expenses.15United States Courts. Bankruptcy Forms Values need to be current, and every creditor needs a complete mailing address, because a creditor left off the list may not be bound by the discharge.
Cases are filed with the U.S. Bankruptcy Court for the District of Arizona, which has offices in Phoenix, Tucson, and Yuma. The filing fee is $338 for Chapter 7 and $313 for Chapter 13.16United States Bankruptcy Court. Filing Fees Installment payment plans are available, and a full waiver is possible if your income sits below 150% of the federal poverty guidelines.17United States Department of Justice. Notice to Chapter 7 Trustees Re Bankruptcy Filing Fee Waivers
The moment the petition is filed, the automatic stay stops creditor calls, lawsuits, wage garnishments, foreclosures, and repossessions.18Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay Shortly after, the court schedules the “341 meeting,” where a trustee reviews your paperwork under oath. Creditors rarely show up, and in most Chapter 7 cases with no nonexempt assets, the meeting finishes in under ten minutes.19Office of the Law Revision Counsel. 11 US Code 341 – Meetings of Creditors and Equity Security Holders
Finishing the Case
Filing the petition doesn’t finish the job. Before the court enters a discharge, you must complete a debtor education course on budgeting and personal financial management. This is separate from the pre-filing credit counseling, and it has to be taken after the petition is filed. Skip it and the court closes the case with no discharge.20Office of the Law Revision Counsel. 11 USC 727 – Discharge In a joint filing, both spouses complete the course individually and file separate certificates.
How Long Bankruptcy Stays on Your Credit
Federal law allows a bankruptcy to appear on your credit report for up to ten years from the date the court entered the order for relief.21Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports In practice, the major credit bureaus typically remove a completed Chapter 13 after seven years, though the statute permits the full ten. A Chapter 7 usually stays the full decade.
The credit hit is real but not permanent. Scores generally begin recovering within a year or two after discharge, particularly for filers who rebuild with secured credit cards or small installment loans. Lenders weight recent payment history more heavily than an older filing, and the bankruptcy’s influence fades as it ages.