• Bankruptcy eliminates most debts, allowing for a fresh financial start.Bankrupt. Businessman with empty pockets (with clipping paths) . image by Vitaliy Pakhnyushchyy from Fotolia.com
  
  For many, bankruptcy is an opportunity to get a fresh financial start when debts and expenses get out of hand. There are two types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy calls for a liquidation of assets and wipes out almost all debts. Alternatively, Chapter 13 bankruptcy does not require the liquidation of assets, but instead allows the debtor to pay his debts over time without accruing interest or additional debt. While the federal government regulates some rules on bankruptcy, citizens of Arizona are subject to additional rules that limit the availability of a bankruptcy in some cases.
  
  

Income

• In order to file for bankruptcy in Arizona, your earnings and wages must pass a "means test." This test compares your wages with the wages of others in the state. If your income is found to be less than the average earnings for Arizona residents, you are likely eligible to file for Chapter 7 bankruptcy. If your income is above average, you will not be eligible for Chapter 7, but you may be able to file for Chapter 13 bankruptcy instead.
  
  

Credit Counseling

• No one can obtain approval for a bankruptcy without attending some form of approved credit counseling. Those who attend credit counseling are financially responsible for the costs of the counseling and cannot roll the costs into the bankruptcy debts. Upon completion of the credit counseling course, attendees will receive a certificate of completion that must be filed with the bankruptcy petition. If the course is not completed prior to filing for bankruptcy, the case may be dismissed by the court. For a complete list of approved pre-bankruptcy credit counseling courses, view the list available from the United States Department of Justice. (See Resource 1)
  
  

Statement of Financial Affairs

• If found eligible for bankruptcy, an applicant can lose eligibility without a statement of financial affairs form. This form is a questionnaire of 25 questions regarding income, debts, lawsuits, assets, bankruptcy expenses and more. In order to complete the form, you will need to have access to financial statements, tax returns and other legal records for the past three years.