Even if you’ve never stopped and thought about it, it probably seems logical that bankruptcy law requires that a debtor reside in a state for a certain period of time before benefiting from that state’s court system. Most types of legal matters typically have residency requirements, although they can vary from state to state. The residency requirement to file for bankruptcy in Arizona is the greater part of 180 days, or 6 months. This is fairly straightforward- you must live in Arizona for 6 months (spending the majority of your time here) before filing for bankruptcy here. But this is just the surface of enjoying the full benefits of what bankruptcy has to offer as a new Arizona resident.
Chapter 7 bankruptcy is the most popular type of bankruptcy in Arizona. It wipes out unsecured debts in a matter of just a few months. Clearly, there must be limitations to this, or it would create opportunities for rampant abuse of the bankruptcy system. A chapter 7 bankruptcy debtor can only keep assets that are protected by bankruptcy exemptions. And a bankruptcy debtor must meet an additional residency requirement before they can protect their assets in chapter 7 with Arizona’s bankruptcy exemptions.
Applying bankruptcy exemptions is a secondary step that comes after determining your income eligibility and which chapter is best to file. You will also need to assemble dozens of documents to create your petition, which will be dozens of pages long. You will need to complete online credit counseling and file your course completion certificates with the court. You will need to stay on top of requests from the trustee and attend your 341 Meeting of Creditors, potentially defending why your debts should be discharged. All of these tasks can be overwhelming to complete on your own, especially if this is the first time you’ve been involved in a legal matter. But affording legal counsel when you’re already seeking relief from overwhelming debts can be its own issue. Many bankruptcy attorneys require payment in full before a case can be filed to ensure that they are paid for their services. This can create a Catch-22 situation if you need the protection from the automatic stay to afford your bankruptcy fees. Atlas Bankruptcy Lawyers offers flexible payment arrangements, including Zero Down payment plan options to make filing for bankruptcy more accessible to residents of Phoenix and Tucson. Want to learn more about our services and the benefits of filing for bankruptcy with our firm? Schedule your free consultation today by calling 480-448-9800.
Residency Requirement For Bankruptcy Exemptions
Unfortunately, meeting Arizona’s residency requirement to file for bankruptcy is not the same as meeting Arizona’s residency requirement to use our state’s bankruptcy exemptions. The residency requirement to use Arizona’s exemptions is four times longer than the residency requirement to file for bankruptcy. That is 730 days, or 2 years, before a new Arizona can protect their assets if they file for chapter 7 bankruptcy.
While a debtor can still file for bankruptcy before the 730-day mark, filing for bankruptcy without being able to use exemptions can be extremely detrimental. The trustee can take any assets that aren’t protected by exemptions and sell them at auction. Most of the proceeds go to pay off debts, but the trustee also keeps a portion as payment for their services. This means that the trustee has all the reason in the world to pursue unprotected assets in a bankruptcy case. And if the debtor is ineligible to use exemptions due to recently moving to Arizona, the trustee can probably assume there are some assets to be had.
If you moved to Arizona at least 6 months ago but less than 2 years ago, filing for bankruptcy can be a tricky issue. Your assets will be at risk if you use chapter 7 bankruptcy. If you have very few assets to be put at risk, you can proceed with chapter 7 despite not meeting the exemption residency requirement. If you do have assets you don’t want to lose, you can consider chapter 13 bankruptcy instead.
Chapter 13 Bankruptcy When Exemptions Are Unavailable
When you have important assets to lose, filing chapter 7 without exemptions may simply not be an option. There are a variety of reasons that debtors choose chapter 13 bankruptcy, but one is when a debtor’s assets wouldn’t be protected in a chapter 7 filing. Because debts are repaid in a chapter 13 payment plan, there is less concern with ensuring the debtor doesn’t have valuable assets that could be sold to pay debts. However, unsecured debts can still be cleared in chapter 13, depending on the debtor’s specific circumstances.
Chapter 13 pays off debts in order, starting with bankruptcy costs, then secured debts, then priority debts, and finally, unsecured non-priority debts. These are the debts that would be eligible for discharge if the debtor had filed chapter 7 instead.
Filing Bankruptcy Before You Move To Arizona
If you haven’t yet moved to Arizona and believe you will need to file for bankruptcy before you meet the residency requirements, you may want to consider filing your petition in your home state before relocating here. If your creditors are anxious to pursue collection, you could be confronted with a lawsuit, wage garnishment, repossession, etc. after your move without the means to fight it due to not meeting the residency requirement. Therefore, if you plan to file for chapter 7, it may be beneficial for you to declare bankruptcy before your move, assuming you meet your current’s state residency requirements. Chapter 7 bankruptcy typically takes 3 to 6 months to complete, so you should plan accordingly. Executing a move while your credit is frozen from the bankruptcy and you are under supervision from the trustee will only make things more complicated. Ideally, you will file your case far enough in advance that it is discharged by the time you relocate to a new state. Chapter 13 bankruptcy takes 3 or 5 years to complete and doesn’t carry the same concern about exemption residency requirements. But every situation is unique, and there could be special factors that influence your decision about the state in which you file your bankruptcy petition. Discuss them in detail with an experienced Arizona bankruptcy lawyer by calling 480-448-9800.
Still Unclear About Arizona’s Bankruptcy Exemption Residency Requirement? Schedule Your Free Consultation Today.
Confirming that you meet Arizona’s residency requirements for bankruptcy is truly just the beginning. Every step of the bankruptcy process must be executed correctly, or you can face serious consequences, such as the loss of your most valuable assets. There is plenty of material about bankruptcy on our website to review, but translating that to your situation can be complex and overwhelming without guidance from an experienced legal professional. Let our knowledgeable staff and attorneys do the heavy lifting in your case so you can be confident it is done right. Our top-rated Gilbert bankruptcy attorneys offer flexible payment plans- most of our clients qualify to file their cases for Zero Dollars Down. You can learn more and see if you qualify today with your free phone consultation- call 480-448-9800 to schedule. Don’t hesitate to contact us!