Should I File Bankruptcy?

This pandemic has everyone weighing the risks of their decisions, specifically the financial decisions. Are you considering bankruptcy? You are not alone.

With the pandemic of 2020, came a substantial increase of unemployed Americans, of Americans facing eviction from their residence, and more. In the black community, statistically, unemployment rates are already high and the black dollar already doesn’t last long in the black household. You can bet this pandemic hit the majority of us extra hard in the area of finances. Bankruptcy is one of those resources we can consider to assist us with financial issues. Like any potential benefit, there are qualifications, guidelines, and a process to follow.

In this article, we’ll discuss what bankruptcy is, the different types of bankruptcy, reasons or situations to file bankruptcy, and how to file bankruptcy in the state of Arizona. If you are an Arizona resident, you’ll benefit the most from this information.

Please be advised we are not lawyers and we strongly recommend you seek legal counsel for the best results in your unique situation.

What is Bankruptcy?

Bankruptcy is a legal process that can completely remove all debts or create a plan for debt repayment. In other words, if you find yourself drowning in debt, this might be the process you need to follow to get on the path of financial freedom. Bankruptcy is not a one size fits all type of process. Each situation is different and in most cases the types of debts owed can vary from debtor to debtor. With that being said there are different ‘chapters’ of bankruptcy that can be filed depending on a person’s situation.

We’ll touch on a few chapters of bankruptcy relevant to the majority of the Dark Phx audience, individuals and businesses. There’s Chapter 7 and Chapter 13, the two filing options as an individual. If a business should need to file for bankruptcy, they would have Chapter 7 as the liquidation option and Chapter 11 if business reorganization is necessary.

– Chapter 7 Bankruptcy

I’ve gathered a few important facts about Chapter 7 Bankruptcy, if you would like to read about it in more detail you can do so here. The point of this chapter is to sell the debtor’s non exempt property and distribute the proceeds amongst the creditors. To qualify for Chapter 7, the debtor will need to be an individual, a partnership, a corporation or other business entity that has met the means test requirements. You cannot file any Chapter of Bankruptcy if you’ve had a bankruptcy case dismiss or if you have not received credit counseling from an approved credit counseling agency within the last 6 months.

Expect your property of value to be taken on the liquidation process, this is not ideal if as a business you are looking to remain in business. The possibility of discharged debts from Chapter 7 bankruptcy is only available to individual filers. The discharge of debt is when the debtor is relieved of the responsibility repayment.

If you find that you qualify for the Chapter 7 Bankruptcy option, I advise you look into the company Upsolve. They advertise free services to help you file bankruptcy referring to themselves as the TurboTax of bankruptcy.

– Chapter 13 Bankruptcy

To avoid liquidation, an individual with regular income can instead file to keep their property and adjust their debts in a repayment plan with a Chapter 13 Bankruptcy. Again, we won’t drown you in details, but you can read more here. In Chapter 13 Bankruptcy, you are given a repayment plan for part or all of your debts over a period of 3-5 years. The length of time determined by your current monthly income and it’s place in reference to the state median income.

To qualify for Chapter 13 an individual or unincorporated business/sole proprietor’s debts must not exceed the maximum for secured and unsecured debts. A couple advantages of this option is you keep your property and this can essentially lower your current monthly payment to your secured debt creditors.

– Chapter 11 Bankruptcy

Another option to avoid liquidation is Chapter 11 Bakruptcy. This option is for businesses, who plan to repay their debts over time and reorganize the structure of their company. To learn more about this chapter click here.

We’ve covered the reason to file bankruptcy and 3 chapters of common bankruptcy filing options for individuals and business entities. Now it’s time to dive into how a person would file for bankruptcy in the state of Arizona. You can find details of local rules regarding bankruptcy here.

The process is a lot of paperwork and details. Most people opt for the hired help of a bankruptcy attorney. The purpose of this lawyer is to counsel you on the process and ultimately help you determine which chapter if any will be to your benefit. This includes helping you gather and prepare all the necessary paperwork, representing you in court procedures, and provide answers to your bankruptcy questions.

If you are brave and detailed, I would say like OCD detailed, you can complete the process on your own and save yourself some costs. In each filing it generally starts off with you filing a petition with the local bankruptcy court. In addition to this the courts are looking for a breakdown of your assets and liabilities, of your income and expenses, a statement of financial affairs, and any unexpired contracts or leases. The courts will charge you a number of fees including filing fee, an administrative fee, and a trustee surcharge. (You can fill out certain forms that may help you get some of these fees waived.)

At some point after the petition filing, the case trustee will hold a meeting of the creditors, debtor is required to be in attendance. This meeting gives creditors and trustee the opportunity to question the debtor of their financial affairs in an effort to determine if an bankruptcy abuse is present. The case trustee will also either liquidate the nonexempt property or monitor the progress of the repayment plan depending on the chapter of bankruptcy filed. Get a complete run down of the process and paperwork needed to used here for each bankruptcy chapter available.


It’s a tough time financially for Americans. Bankruptcy may have came up in conversation or as a thought. If you are considering options to resolve you debts, we have discussed the purpose of bankruptcy and the different types that can be filed per an individual or business’ financial situation. You’ve also been provided a number of links to resources that can help you complete the process on your own in an effort to save your self more money. Again, we recommend legal counsel for the inexperienced or just to confirm your actions as correct. Imagine putting in all the necessary work and your case being dismissed for a paperwork error, now you have to wait 6 months to try again. Filing bankruptcy is not the end of the world, but understand there are plenty of other options to consider prior to option for bankruptcy.

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