Chapter 7 and Chapter 13?

• You have the choice of Chapter 7 bankruptcy, which will wipe out most of your debts and enable you to get a fresh start, or Chapter 13 bankruptcy, which will give you time to pay your creditors. To qualify for Chapter 7, you must pass the so-called "means test." Simply, the court will compare your income to the mean income for your Arizona county to see if you are able to pay your creditors in about five years. If it determines that you can, it will deny your motion.
  
  

Credit Counseling and Taxes

• If you decide Chapter 7 Bankruptcy is for you, you must receive credit counseling before you file. It is required by federal law, and the Federal Trade Commission has a website that will provide you with more information. You must also file returns for any taxes you owe before filing for Chapter 7 bankruptcy.
  
  

Debts Excluded from Chapter 7 Bankruptcy

• Most student loans and taxes you have incurred within three years of filing for bankruptcy will be excluded, as will alimony and child support. Also excluded are luxury goods in excess of $550 that you have purchased within 90 days of filing and cash advances in excess of $825 that you may have received within 70 days of filing. And debts that were sustained fraudulently like for the purchase of illegal drugs also will be excluded. Debts secured by assets are also not included.
  
  

Assets Excluded from Chapter 7 Bankruptcy

• Arizona is considered one of the more consumer-friendly states in the nation. For example, you may keep up to $150,000 equity that you have in your home, up to $5,000 equity in your car ($10,000 if you are disabled) and up to $2,500 worth of equipment that you use in your work. Equity is the difference between an asset's market value and what you owe on it. There are more assets exempt in Arizona, which you will see under "References" below.
  
  

Payment Plan

• When you file for a Chapter 13 bankruptcy in Arizona, you must also file a plan to pay back your creditors. After a court-appointed trustee verifies its accuracy, your plan will be distributed to your creditors, who can object to it. If it is approved, you will send monthly payments to the trustee who, in turn, will pay your creditors. You will retain all your assets as long as the plan is followed.