What Chapter 7 Actually Does
Chapter 7 is the chapter most people mean when they say "bankruptcy." It eliminates qualifying unsecured debt — credit cards, medical bills, personal loans, old deficiency balances — and it does it in about three to four months.
It's formally called the liquidation chapter, which frightens people who look it up. The name refers to the trustee's power to sell property that isn't protected by an exemption. In practice, the overwhelming majority of consumer Chapter 7 cases are what's called "no asset" cases — everything the filer owns is covered by Arizona's exemptions, the trustee sells nothing, and the person keeps what they had when they walked in.
The moment your case is filed, the automatic stay takes effect. That's a federal court order, and it stops collection immediately — garnishments, lawsuits, foreclosure sales, repossessions, and the phone calls. It isn't a request to your creditors. It's binding on them the day of filing.
Do You Qualify?
Chapter 7 has an income test, and it's the first thing I look at.
The first part is simple arithmetic. Your household income over the previous six months is compared against Arizona's median income for a household of your size. Below it, you qualify, and the analysis stops there.
Figures updated August 24, 2026.
| Household size | Annual income | Monthly |
|---|---|---|
| 1 | $73,935 | $6,161 |
| 2 | $89,027 | $7,419 |
| 3 | $104,965 | $8,747 |
| 4 | $121,174 | $10,098 |
| Each additional person | +$11,100 | +$925 |
Source: U.S. Trustee Program, Census Bureau Median Family Income Data. If your household income is below the figure for your size, you qualify for Chapter 7 without completing the rest of the means test. Earning more than the median does not disqualify you — it means the calculation continues, and deductions for secured debt, taxes, childcare, and health care often bring filers back under the line.
Above the median, it's not over. The test moves to a second stage that subtracts allowed living expenses — housing, vehicles, taxes, childcare, health costs — from your income to determine what's actually left over. Plenty of people whose gross income looks too high still qualify once real expenses are accounted for.
If you don't qualify for Chapter 7, Chapter 13 is available and does a different job.
There's also a timing rule: if you've received a Chapter 7 discharge before, you generally have to wait eight years from that filing date before you can get another.
What You Keep
This is the question almost everyone arrives with, and it's the one most websites won't answer.
Arizona has its own set of exemption laws, and Arizona has opted out of the federal exemption scheme — so Arizona filers use Arizona's exemptions rather than the federal ones.
Which state's exemptions apply to you depends on where you've lived, not simply where you file. The rule looks at where you were domiciled during the two years before your filing date. If you've been in Arizona that whole time, Arizona's exemptions apply. If you moved here more recently, you may be required to use the exemptions of the state you came from — and it's the opposite of what most assume.
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Amounts current as of January 1, 2026.
| Property | Protected amount | Authority |
|---|---|---|
| Home equity (homestead) | $437,600 | A.R.S. § 33-1101 |
| Motor vehicle equity | $16,500 | A.R.S. § 33-1125(8) |
| Motor vehicle — filer or dependent with a physical disability | $27,500 | A.R.S. § 33-1125(8) |
| Household furniture, furnishings, and appliances | $16,500 | A.R.S. § 33-1123 |
| Money in a single bank account | $5,600 | A.R.S. § 33-1126(A)(9) |
| Life insurance proceeds to surviving spouse or child | $20,000 | A.R.S. § 33-1126 |
| Engagement and wedding rings | $2,000 | A.R.S. § 33-1125(4) |
| Firearms | $2,000 | A.R.S. § 33-1125(9) |
| Computer, bicycle, sewing machine, bible, burial plot | $2,000 | A.R.S. § 33-1125(7) |
| Prepaid rent or security deposit | $2,000 | A.R.S. § 33-1126 |
| Wearing apparel | $500 | A.R.S. § 33-1125(1) |
| Musical instruments | $400 | A.R.S. § 33-1125(2) |
| Watch | $250 | A.R.S. § 33-1125(6) |
| Books and documents | $250 | A.R.S. § 33-1125(5) |
| Qualified retirement accounts | Fully exempt | A.R.S. § 33-1126(B) |
Amounts double for married couples filing jointly, except the homestead exemption, which is limited to one per household. Exemptions apply to your equity — what the property is worth minus what you owe on it — not the full value. The homestead, vehicle, household goods, and bank account exemptions are adjusted each January 1 for inflation; the remaining amounts are fixed by statute.
Retirement accounts sit outside all of this. Properly qualified retirement plans are generally protected in bankruptcy, and in most cases a 401(k) or IRA isn't at risk at all. People cash out retirement savings to pay debts that a bankruptcy would have discharged, and it's one of the more painful mistakes I see.
Whether your particular property is fully protected depends on your actual numbers — what you owe on the house, what the car is worth, what's in the account. That's what a consultation is for.
What Actually Happens
Before filing — the credit counseling course. Federal law requires a short course from an approved agency, completed within 180 days before your case is filed. It's done online and takes about 30 minutes.
Filing. Your petition and schedules go to the U.S. Bankruptcy Court for the District of Arizona. The automatic stay begins the moment the case is filed.
About 30-40 days later — the meeting of creditors. Known as the 341 meeting, after the section of the Code that requires it. A trustee asks you questions under oath about your paperwork. It usually lasts a few minutes. Despite the name, creditors rarely attend.
The debtor education course. A second required course, this one after filing and before discharge.
Discharge, roughly 60 to 90 days after the 341 meeting. The court order eliminating your qualifying debts. Start to finish, a straightforward case runs about three to four months.
What Chapter 7 Doesn't Do
I'd rather you know this now than after filing.
Some debts survive a discharge. Most student loans, recent income taxes, child support and alimony, criminal fines and restitution, debts arising from fraud, and personal injury liability from driving under the influence.
It doesn't let you keep property you're not paying for. If you're behind on a car loan and want to keep the car, Chapter 7 alone won't fix that — the lender's lien survives. Chapter 13 is the chapter that catches up arrears.
It doesn't stop a foreclosure permanently. The automatic stay halts a trustee's sale, but Chapter 7 has no mechanism for curing missed mortgage payments over time. Chapter 13 does.
It appears on your credit report for ten years. That number sounds worse than it usually plays out — scores respond heavily to what you currently owe, and a discharge zeroes your unsecured balances on a known date. Most of my clients see their scores begin recovering within a year or two.
It is not a secret. Bankruptcy filings are public record. That said, federal law prohibits employers, both government and private, from firing you because you filed, and in practice most employers never find out.
Chapter 7 or Chapter 13?
Chapter 13 reorganizes what you owe into a plan over three to five years. It's the right chapter when you need to cure mortgage arrears, protect property that exceeds the exemptions, or don't pass the Chapter 7 income test. → Learn about Chapter 13
Still weighing bankruptcy against debt settlement? Both are real options and settlement isn't always the wrong one. → Debt settlement vs. bankruptcy
Talk It Through First
Consultations are free. I'll look at your income, your property and your debts and tell you plainly whether Chapter 7 fits, whether Chapter 13 is the better route, or whether you'd be better off not filing at all.
I file throughout Arizona and meet with clients virtually, so getting to Phoenix isn't necessary.
If you're being garnished or a trustee's sale is scheduled, say so when you get in touch. Timing changes what's possible.
Common questions
Will I lose my house? Usually not. Arizona's homestead exemption protects a substantial amount of equity, and if your equity falls within it, the trustee has no reason to sell. Whether yours does depends on the home's value and what you owe against it.
Will I lose my car? Usually not. Arizona's vehicle exemption protects a set amount of equity, and most vehicles carrying a loan have little equity to begin with. If you're current on payments and within the exemption, you keep it.
Can I file without my spouse? Yes. Married people can file individually. Whether you should depends on whose name the debts are in and how Arizona's community property rules apply to your situation — worth discussing rather than guessing.
What happens to my tax refund? It can be treated as an asset, depending on timing and amount. This is one of the more common places where filing a few weeks earlier or later changes the outcome, and it's a good reason not to file without advice.
Do I have to go to court? There's one meeting, and it's usually short. It's conducted by a trustee, not a judge, and in a straightforward case you won't see a courtroom.
How much debt do I need before it's worth filing? There's no minimum. The question isn't the size of the number, it's whether you can realistically pay it down within a reasonable time.
Can I be fired for filing bankruptcy? No. Federal law prohibits both government and private employers from terminating you because you filed.
Will everyone find out? Filings are public record, but nobody is notified. In practice it's rarely discovered unless someone goes looking.
When you hire me, you get me
Your calls, texts and emails come to me directly — not to a paralegal, not to an intake team. To the attorney who actually knows your case.
I can work that way because I keep my caseload small. This isn't a volume practice, and you won't see me advertised on a billboard or the back of a bus. I work with people who'd rather have their attorney's attention than a case number.
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