Chapter 7 vs. Chapter 13 Bankruptcy in Arizona

If you’re struggling with debt in Arizona, you may be wondering whether Chapter 7 or Chapter 13 bankruptcy is right for you. These are the two most common forms of personal bankruptcy in Arizona, but they work very differently. This guide explains the key differences, eligibility rules, and what each option means for Arizona residents.

Key Differences Between Chapter 7 and Chapter 13 in Arizona

Feature

Who qualifies?
Duration
Debt type
Property treatment
Best for

Chapter 7

Must pass Arizona means test
3–6 months
Wipes out unsecured debt
Exemptions protect the large majority of property
People with average income for their family size & high unsecured debt

Chapter 13

Steady income; unsecured debt < $465k, secured < $1.4M
3–5 years
Repays debts over time
Keep all property if plan payments are made
People with income who need to stop foreclosure, repossession, any type of collection activity and catch up on secured payments like car payments and mortgage

What Is Chapter 7 Bankruptcy?

Known as the “fresh start” bankruptcy
Eliminates many unsecured debts, such as credit cards, medical bills, and personal loans
Usually resolved within 3–6 months
A court-appointed trustee may sell non-exempt assets to repay creditors
Strong Arizona exemptions (like $425,200 homestead protection and $16,000 vehicle exemption) allow most filers to keep essentials

Chapter 13 Bankruptcy?

Called the “wage earner’s plan”
You make a 3–5 year repayment plan overseen by the court
Allows you to catch up on mortgage arrears, car payments, or back taxes
You usually keep all of your property, as long as you stick to the repayment plan
Works best for Arizonans with steady income who need time to reorganize, not eliminate, debt

Which Bankruptcy Is right for Arizona Residents?

Chapter 7 may be better if: You have mostly unsecured debts (credit cards, medical bills) Your income is around Arizona’s median or you pass the means test You don’t have significant assets beyond Arizona’s exemption limits Chapter 13 may be better if: You’re facing foreclosure in Phoenix, Tucson, or elsewhere in Arizona and want to save your home You have steady income to make monthly plan payments You need to catch up on secured debts like car loans or mortgage arrears

Frequently Asked Questions

Which bankruptcy is faster in Arizona, Chapter 7 or Chapter 13? Chapter 7 cases in Arizona are usually completed in 3–6 months, while Chapter 13 takes 3–5 years because it involves a repayment plan. Can Chapter 13 bankruptcy stop foreclosure on my Arizona home? Yes. Filing Chapter 13 in Arizona triggers the automatic stay, which stops foreclosure immediately. You can then use the repayment plan to catch up on missed mortgage payments. Will I lose my car if I file Chapter 7 bankruptcy in Arizona? Not necessarily. Arizona’s vehicle exemption protects up to $16,000 in equity ($26,700 if disabled). If your car is worth more than the exemption, Chapter 13 may help you keep it. Can I keep my house if I file Chapter 7 in Arizona? If your home equity is less than $425,000, Arizona’s homestead exemption usually protects it. If you have more equity than that, Chapter 13 may be the safer choice. Do I Need to Have Lived in Arizona to Use These Exemptions? Yes—Arizona requires that you’ve lived in the state for at least 2 years (730 days) before your bankruptcy filing to use state exemptions.

Thinking about filing a chapter 7 bankruptcy or chapter 13 bankruptcy in Arizona?

Don’t worry — you won’t be branded with a giant “B” on your forehead, and no one’s going to play sad violin music when you walk into a bank. Bankruptcy is simply a financial reset button, and the sooner you push it, the sooner you can move forward. Hopefully we have helped arm you with the ammunition of knowledge to decide whether a chapter 7 bankruptcy of a chapter 13 bankruptcy 13 is more appropriate.

Our network of trusted Arizona bankruptcy attorneys will certainly explain which chapter of bankruptcy is best for your situation, and can also help you stop dodging creditor calls, explain your options in plain English, and point you toward the best path forward — without judgment (and definitely without paperwork-induced tears).

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