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Arizona bankruptcy filings increase in February

Phoenix was just one of the cities in Arizona to see an increase in bankruptcy filings in February, up to 1,623 from 1,321 in January. Across the state, 2,160 Arizona residents initiated bankruptcy proceedings in February, compared to 1,795 in January.

However, there is good news for Arizona residents, as the figure is still 12 percent lower than that of February 2011. As the economy has improved over the past two years, the number of people filing for bankruptcy has also decreased. Prior to February, eight of the last 10 months saw decreasing figures.

More than 80 percent of bankruptcy proceedings in February were filed under Chapter 7. Chapter 7 bankruptcy discharges practically all forms of debt, with only a few exceptions, including student loans. Not all of the filer's assets are used to pay the creditors: there are some household possessions that the filer can retain in the process.

Bankruptcy filings generally rise in February because many people then have their tax refunds to use for filing expenses as well as to pay student loans and other debts that will not be discharged in bankruptcy. If the filing takes place before income tax refunds are received, the money generally goes to pay debtors claims.

Certain income requirements must be met in order to qualify for Chapter 7 bankruptcy; for those who do not meet the means test, Chapter 13 bankruptcy may be an option. Most of the 20 percent of remaining bankruptcy proceedings were initiated under Chapter 13. Chapter 13 provides similar debt relief as Chapter 7, and filers can make court-supervised payments, depending on their ability to pay.

Source: The Arizona Republic, "Phoenix-area bankruptcies rise in February," Russ Wiles, March 5, 2012