Arizona Bankruptcy Law in Plain English (and how it’s different from other states)

Bankruptcy is federal law, which means an Arizona bankruptcy case is filed in U.S. Bankruptcy Court, and the core rules for Chapter 7 and Chapter 13 come from the federal Bankruptcy Code. So no, Arizona doesn’t have a secret “Grand Canyon bankruptcy chapter.” But Arizona does matter a lot in bankruptcy because state law controls key money-saving details, especially what property you’re allowed to keep. Justia Law

The two most common options: Chapter 7 vs. Chapter 13

Chapter 7 bankruptcy (liquidation) is designed to wipe out many unsecured debts (like credit cards and medical bills) relatively quickly. In a typical Chapter 7, a trustee can sell non-exempt property to repay creditors. Most people who file Chapter 7 keep the things they own because exemptions protect them.

Chapter 13 bankruptcy (repayment plan) is a 3 to 5 year payment plan. It’s often used by people who have higher income, are behind on a mortgage or car, or have assets they want to protect. At the end of the plan, many remaining eligible unsecured debts are discharged.

The biggest Arizona differences (vs. other states)

Here’s where Arizona stands out:

1. Arizona is an “opt-out” state for exemptions.
   In many states, filers can choose between the federal exemption list and the state exemption list. In Arizona, most residents cannot use the federal exemption scheme and must use Arizona’s exemptions instead. Justia Law

2. Arizona’s homestead exemption is large and inflation-adjusted.
   Arizona protects up to $400,000 of equity in a primary residence (homestead), and the statute provides for annual cost-of-living adjustments starting January 1, 2024. This is a big deal because homestead amounts vary wildly across the U.S., ranging from relatively small caps in some states to very large (or even unlimited) protection in others. Arizona Legislature+1

3. Arizona protects more vehicle equity than many states.
   Arizona exempts up to $15,000 of equity in one motor vehicle, or up to $25,000 if the debtor or a dependent has a physical disability, and it also adjusts annually for cost of living starting in 2024. Arizona Legislature+1

4. No wildcard exemption in Arizona.
   Some states (and the federal exemption system) offer a “wildcard” exemption you can apply to anything, which is handy for cash, tax refunds, or random valuable items. Arizona generally does not offer a wildcard exemption, so planning exemptions can be tighter here than in wildcard-friendly jurisdictions. My AZ Lawyers

5. Residency timing can change which exemptions you’re allowed to use.
   Federal law uses a 730-day domicile rule when determining which state’s exemptions apply. If you recently moved to Arizona, you might not automatically get Arizona exemptions yet. Legal Information Institute

A couple of “everywhere in the U.S.” bankruptcy requirements

No matter what state you’re in, individual filers must complete credit counseling before filing and a debtor education course after filing to receive a discharge (with limited exceptions). United States Courts

This is general information, not legal advice. Arizona exemption amounts can adjust over time, and the right chapter and strategy depends heavily on income, assets, and goals.