LaGrandeNovember 15, 2025

Debt problems weigh on your sleep, your mood, and your plans. If calls and threats are piling up, you are not alone, and you do have options.

At Yusufov Law Firm PLLC, we help individuals and business owners in Mesa, Phoenix, and Tucson figure out the right path forward. We aim to fix the financial problem, reduce stress, and help you get life back on track.

Bankruptcy: The Basics

Bankruptcy is a legal process that gives relief from debts you cannot pay. It can stop harassment, pause foreclosure or repossession, and create space to rebuild. For business owners, it can be a tool for reorganizing debt and keeping the doors open.

Different chapters fit different goals. Chapter 7 is often used by people who need a fast reset and who have little non-exempt property, while Chapter 13 uses a court-approved repayment plan. Businesses use Chapter 11 to restructure debt while continuing operations.

In Chapter 7, a trustee can sell non-exempt property and pay creditors, and then qualifying debts get discharged. In Chapter 13, you keep property and make payments for three to five years based on income and expenses. No single chapter fits everyone. A short chat about your income, property, and goals helps match the chapter to your needs.

Immediate Effects of Filing for Bankruptcy

The moment you file, the automatic stay kicks in under 11 U.S.C. § 362. This stay stops most collection actions against you and your property. Lawsuits, wage garnishments, bank levies, repossessions, and collection calls must pause while the case moves forward.

There are limits under 11 U.S.C. § 362(b). Some family court actions, criminal proceedings, and certain eviction steps after a judgment can continue, and repeat filings can limit the stay. Creditors can also ask the court to lift the stay in certain situations.

It is also smart to know which debts get wiped out and which do not. Debts like child support, alimony, some taxes, and many court fines stay in place. Credit cards, personal loans, medical bills, and other unsecured debts can usually be discharged.

If you have questions about a certain debt, bring it up; the type of debt often controls what relief you can get.

Potential Consequences of Bankruptcy

Bankruptcy solves real problems, yet it also carries trade-offs that you should weigh. Knowing the common outcomes helps you plan and avoid surprises.

Impact on Credit Score

Filing can lower your credit score, especially if your score was healthy before the case. A Chapter 7 filing can stay on your credit report for 10 years, and a Chapter 13 filing for 7 years. Banks, businesses, potential employers, and lenders can see it, and that can affect borrowing and interest rates for a while.

Loss of Property

In Chapter 7, non-exempt property can be sold by the trustee. Arizona requires the use of state exemptions, which are fairly generous and protect most essentials, like basic household goods, a car, a house, and retirement accounts, up to set limits. Items at risk can include a second home, a boat, an extra car, jewelry, or antiques.

Impact on Co-Signers

Filing can shift pressure to anyone who co-signed your loan or credit card. Chapter 7 often leaves co-signers exposed to collection, whereas Chapter 13 provides a co-debtor stay during payments. There are several options if you want to avoid shifting the burden onto a co-signer:

  • Reaffirm the debt if keeping the loan makes sense and you can handle the payments.
  • Keep paying the debt after discharge to protect the co-signer from collection.
  • Choose Chapter 13 when protection for co-signers is a top concern.

Tax Refunds

Tax refunds can be used to pay creditors. In Chapter 7, refunds tied to any period before the filing can be taken if not exempted. In Chapter 13, some or all of your refunds may be applied to the repayment plan, depending on the plan terms and your budget.

Public Record and Social Considerations

Bankruptcy is a public record so that others can find it. However, it is usually not possible to determine if someone filed for bankruptcy without actively searching for this information.  It is therefore unlikely that your friends or colleagues will learn about your bankruptcy, unless you tell them, or they specifically search for this information.  Some people feel shame or stress, or believe that bankruptcy will bring with it unwanted stigma.  While such feelings are common, they are often unjustified—many people who file for bankruptcy do so for reasons that are out of their control.  And even very successful people may have, at one point in their lives, had to file for bankruptcy.  Bankruptcy is ultimately just a financial tool that is available for legally fixing debt problems. With bankruptcy comes a cleaner balance sheet and elimination of collection problems after discharge.

With the pros and cons in mind, it helps to take a few smart steps before filing. A little prep work goes a long way.

Steps to Take Before Filing Bankruptcy

A short checklist keeps the process smooth and reduces delays. These items also line up with court rules and trustee requests.

  • File your tax returns; the trustee always asks for recent returns.
  • Avoid new debt and large charges, especially on credit cards.
  • Gather documents, including bills, lawsuits, pay stubs, bank statements, and any letters from creditors.
  • Complete a credit counseling session within 180 days before filing, as required by 11 U.S.C. §§ 109, 111.
  • Fill out all forms fully and truthfully, even if the forms are requested by your attorney and are not filed directly in court.

If you are unsure about a document, save it anyway. It is better to have it and not need it than to need it and not have it.

Alternatives to Bankruptcy

Not everyone needs a bankruptcy. If your debt is smaller or your income has improved, these options can work:

  • Sell non-essential assets to lower balances and stop interest from snowballing.
  • Negotiate with creditors for reduced balances, lower interest, or longer terms.
  • Use a nonprofit credit counselor to set up a debt management plan with affordable payments.  Remember that non-profit credit counselors do not charge fees for their services, except possibly nominal fees.
  • Look at a debt consolidation loan to combine bills into a single payment with a fixed rate.

Each path has pros and cons, so weigh the payment, the total interest, and the time it takes to become debt-free.

Considering Bankruptcy? Contact Yusufov Law Firm Today

At Yusufov Law Firm PLLC, we focus on solving real debt problems for people and small businesses across Mesa, Phoenix, and Tucson. If you want clear next steps and an honest take on your options, feel free to call us at (520) 745-4429 or reach out through our website. We welcome your questions and can walk through Chapter 7, Chapter 13, or non-bankruptcy solutions. Our team works hard to deliver results that help you move forward with confidence.