Last Updated on January 11, 2023 by James Gentile
Filing for bankruptcy is never an easy decision. It is the best course of action when you find yourself in serious financial circumstances that require a drastic but direct approach to improve things. Bankruptcy protects you from your creditors being able to garnish wages and bank accounts, harass you and continue to ask for payments that you cannot currently pay. In this post, we will briefly discuss four facts about bankruptcy law in the state of Arizona.
Once you have decided that bankruptcy is an option for you, there are some important questions to answer regarding Arizona bankruptcy law which will keep you moving in the right direction, even if you find that bankruptcy is your only option. Here are some facts about bankruptcy to consider.
Retirement Funds and Bankruptcy
One of the most important things you need to know is where your retirement funds are exempt from bankruptcy. This is your security for later on after your bankruptcy has been discharged, so you need to keep this intact. Section 11 U.S.C. § 522 and Ariz. Rev. Stat. section 33-1126 of the bankruptcy laws in Arizona state that any tax-exempt retirement accounts, such as 401 (k)s, 403 (b)s, and most profit-sharing and money purchase plans, as well as defined benefit plans and SEP and SIMPLE IRA’s are exempt from the bankruptcy status.
Additionally, the pension plans of police officers, firefighters, and members of the board of regents and administrative officers are exempt, and the retirement and disability of state employees, rangers, district employees, public safety personnel retirement systems, and ERISA-qualified benefits. If your employer retirement plan does not fall into any of these categories, you will want to consult with an attorney to determine if your retirement funds and bankruptcy can work together without losing any of the funds in a bankruptcy hearing.
Student Loans and Bankruptcy
A Chapter 13 Bankruptcy will allow you to reorganize your student loan debt and make payments you can afford over a 3 to 5 year period. Bankruptcy protects you in many situations, but student loans are not generally eligible for discharge, only repayment. The only exception to this is establishing that to repay the student loan would create a “substantial hardship” on the debtor and his family or create a situation that would make it impossible to pay for the necessities of life. The court may also require you to show that paying back the loan will create a financial hardship that is unlikely to improve over time. A bankruptcy attorney can help you look at all of your options and assess whether or not you might be eligible to discharge your student loan in your case.
Property and Bankruptcy
In most cases, you may keep your home in a bankruptcy case if you have kept the payments current and if the equity in your house is exempt. If you are filing a Chapter 7 bankruptcy in Arizona, you are also allowed to keep up to $150,000 equity in your home. If you file a Chapter 13 bankruptcy and you are behind in your payments, you may still be able to keep your home if you make the payments current under the new bankruptcy status, where many of your other debts are resolved. The courts generally allow you to focus on the big things, like your house, as you eliminate the other debts so that you will have more assets once the bankruptcy is discharged. It is also to the benefit of home lenders to have you keep paying on the home loan. Most people will keep all or substantially all their other assets under Arizona’s liberal exemption laws regarding other types of property.
When to Hire an Attorney
If you need to file bankruptcy in Arizona, you need to have someone on your side, someone who knows the court’s expectations and processes and understands the bankruptcy laws. There are many gray areas in the law, and you need to have someone help you who knows what to do to get you the best decision possible so that you can keep your property, negotiate on student loans, and create a plan for the future. For help when you need it, contact us today. Bankruptcy is a fresh start, but you need a seasoned lawyer on your side who can get you the best deal possible so that you can hang onto your valuable assets and plan for your future. Call us today.