Business Bankruptcy in Arizona: 6 Facts for a Phoenix Chapter 11 or Chapter 7

A chapter 11 case in Phoenix begins with an order the debtor never requested. Under the Bankruptcy Court's Local Rule 1002-1, "In cases filed under or converted to chapter 11, the court will issue an order setting an initial status conference," and the debtor's lawyer arrives at that conference expected to speak, in some detail, about why the business failed.

The Code is national. Business bankruptcy in Arizona is decided under the same statute that governs a filing in Boston, and the $3,424,000 Subchapter V ceiling, the automatic stay, and the chapter 7 rules for entities travel unchanged. What the District of Arizona adds is procedure, much of it written into local rules amended as recently as June 1, 2026, plus a state homestead law generous enough to matter for any owner whose guaranty puts the house in play.

1. One District, One Address on First Avenue, Two Offices Inside It

Arizona has no divisions to argue about. 28 U.S.C. 82 reads, in full on the point, "Arizona constitutes one judicial district," with court held at Flagstaff, Globe, Phoenix, Prescott, Tucson, and Yuma. The bankruptcy court lists locations in Phoenix, Tucson, Yuma, Flagstaff, and Bullhead City.

In Phoenix the court sits in the U.S. Courthouse and Federal Building at 230 North 1st Avenue, Suite 101. The Office of the United States Trustee for Region 14, headed by U.S. Trustee Ilene J. Lashinsky with Assistant U.S. Trustee Elizabeth C. Amorosi, is at the same street address, Suite 204. The clerk who dockets the petition and the office that will scrutinize the debtor's reports share a building.

The Phoenix office does not accept cash.

2. The Status Conference Order Arrives Before Anyone Asks for It

Local Rule 1002-1 has been on the books since 2018, and it reads like a syllabus. At the initial status conference counsel should be ready to discuss the debtor's operations and the causes of the filing, the professionals the estate intends to employ, "unique issues regarding secured debt, employees, executory contracts, cash collateral, existing management and/or equity owners," deadlines for a plan, a disclosure statement, and claims, post-petition operations, pending litigation, and, "if applicable, the additional requirements for a small business case."

Read that list as an owner rather than as a lawyer and it becomes a set of questions about the months before the petition: which funder took what from the account, which lease is underwater, whether the people running the company should keep running it, and whether the numbers that persuaded a merchant cash advance provider to fund in the first place bear any relation to the numbers that will now be filed under penalty of perjury, which is the question the conference will reach whether or not anyone schedules it for discussion.

A Subchapter V case carries its own federal status conference as well. Section 1188 requires the court to hold one within 60 days after the order for relief, and the debtor must file a report at least 14 days beforehand describing its efforts to reach a consensual plan. In Phoenix the local order and the federal deadline can arrive close together, and the paperwork for both draws on the same facts.

In 2018, when the rule was adopted, Subchapter V was not yet law; the public law that added its sections, including section 1195, dates from August 23, 2019. The rule's phrase about "the additional requirements for a small business case" therefore predates the subchapter most small Phoenix debtors now elect. The court has let the language stand, and it fits both.

None of this is a trap (the rule describes what any competent chapter 11 lawyer would prepare anyway). It does mean that an Arizona owner should expect to explain the collapse in open court within weeks of filing, on the record.

3. Cash Collateral Requests Must State Their Terms at the Top

For a business that owes merchant cash advances, the cash in its account on the petition date may be claimed by a funder with a filed security interest in receivables, and section 363(c)(2) forbids using cash collateral without the secured party's consent or a court order. Arizona's Local Rule 4001-2 governs how that order is sought. The motion or agreement "must conspicuously state" in its first or second paragraph whether it seeks any of the relief listed in Local Rule 4001-4(b). Interim orders may issue on stipulation or, without the secured creditor's consent, "upon motion and after a hearing," and notice of an interim order sets an objection deadline of "fourteen (14) days from the date the notice is served, unless ordered otherwise."

Local Rule 4001-4 adds a notice requirement for anything urgent. For motions seeking an accelerated hearing or interim relief "within the first thirty (30) days after the filing of a chapter 11 petition," the debtor must give the U.S. Trustee "at least twenty-four (24) hours' advance notice" and courtesy copies. Cash collateral and financing motions must flag provisions such as cross-collateralization and findings on the validity or perfection of the secured debt.

Those flagged provisions are the ones that bury a funder's weakest arguments. A stipulated finding that a lien is valid, tucked on page eleven of an interim order, functions the way a signed delivery receipt functions for a crate nobody opened: the question of what was inside has been answered by the signature. The rule puts the signature on page one.

4. Chapter 7 Ends an Arizona LLC Rather Than Freeing It

The title of this page names chapter 7, and the chapter deserves a plain statement. Under 11 U.S.C. 727(a)(1), the court grants a discharge unless "the debtor is not an individual." An Arizona LLC or corporation that files chapter 7 therefore receives no discharge at all. A trustee takes control and, under section 704(a)(1), must "collect and reduce to money the property of the estate," after which the entity is left with nothing and its debts are not so much discharged as stranded. The filing fee is $338, against $1,738 for chapter 11.

The owner's personal guaranty survives the company's chapter 7 untouched.

5. The Court's ADR Program Is Available, Not Imposed

Since General Order 92 of April 30, 2004, the District of Arizona has offered an alternative dispute resolution program "available for use by all litigants," now governed by Local Rules 9072-1 through 9072-9. Under Local Rule 9072-3, "all controversies arising in an adversary proceeding, contested matter, or other dispute in a case are eligible for referral." Eligible is the operative word. The rules make mediation possible for a fight with a funder over cash collateral or a claim objection; they do not make it mandatory.

6. Arizona's Homestead Is Large and Is Fixed on the Petition Date

Under A.R.S. 33-1101, an Arizona resident may hold as a homestead, "exempt from attachment, execution and forced sale, not exceeding $400,000 in value," with value referring to equity and one exemption per married couple or single person. Subsection (D) adjusts the figure every January 1 beginning in 2024 for the change in the cost of living, rounded up to the nearest $100; this page does not state the current adjusted number because no official source for it was located. Subsection (F) settles timing: in a bankruptcy case the exemption amount "initially shall be determined as of the date the bankruptcy petition is filed."

The exemption protects a person's residence, not a company's property, so its relevance to a business case is the guaranty. Research for this page found no Arizona commercial financing disclosure statute comparable to California's or New York's.

Before a Phoenix Status Conference Is Ever Set

An Arizona company that needs the stay, the power to reject a lease, or a plan that binds a dissenting funder needs a bankruptcy lawyer admitted in the District of Arizona. Delancey Street is not a law firm and cannot be that lawyer; it files nothing in Phoenix or anywhere else and gives no legal advice. What it provides is a confidential look, at no cost, at merchant cash advances and other business obligations to see whether negotiation can resolve them outside court, working with independently licensed counsel when legal work is needed. It keeps no Arizona office and the review does not require one. No funder is obliged to accept any proposal, and the review makes no promise that one will.

Some owners will read Local Rule 1002-1 and decide that the questions it lists are better answered across a table than across a courtroom.