Even though many Arizona residents may hesitate to ask for help when facing financial difficulties, the reality of the situation is that filing for bankruptcy is a federal protection offered to those who are struggling to make ends meet. It is similar to asking for help from the court - for relief from creditors.
Once the debtor files for bankruptcy, a bankruptcy estate is created consisting of all of the debtor's personal and real property. There is a common misconception that a debtor loses everything when they file for bankruptcy, but this is extremely unlikely. Depending on the exemptions available and the value of the property, debtors can retain possession of assets such as the residential home and other real property. State and federal law determine exemptions and the list of exemptions available to Arizona residents is extensive, but what exactly does that mean?
A debtor claims the exemption. In order to be completely exempt, the value of the property must equal the value of the exemption available. Where the value of the property exceeds the value of the exemption, that excess value may be lost if the estate has to be liquidated in order to meet creditor's demands. These matters can become complicated, and an experienced bankruptcy attorney may be able to assist debtors understand which bankruptcy option suits their specific circumstances.
Whatever route Arizona consumers choose to follow, filing for personal bankruptcy may be one way they can alleviate their financial difficulties and get started on rebuilding their financial lives without losing their prized possessions. Retaining possession of something they hold dear may also help debtors adjust better.
Source: Michigan State University Extension, "Should you file for bankruptcy? Part 2," William Hendrian, June 14, 2014