What is the Means Test?
Arizona Income Limits in a Chapter 7 Bankruptcy
The means test is often confused. Actually, there are two separate tests to determine if you qualify for a Chapter 7 bankruptcy.
The first test is pretty simple. It has to do with the Arizona state annual median income and how you compare. If you are below the state median income (which is frequently adjusted), your income automatically qualifies you for a Chapter 7 bankruptcy. Of course, there could be other reasons you can’t file a Chapter 7, such as a previous bankruptcy filing.
But for the most part, if your income is below the median, you should be able to get into a Chapter 7. Remember, we look at the average of the 6 months before you file bankruptcy to determine your “annual” income. Here are the annual income limits for a Chapter 7 bankruptcy in Arizona as of November 1, 2015:
- Single Person Household: $45,933
- Two Person Household: $56,351
- Three Person Household $60,392
- Four Person Household $71,195
The Means Test in Arizona
If your income is more than the state median, you will have to take the means test to see if you can still file a Chapter 7 bankruptcy. Under the means test, the law allows us to calculate your disposable income, which is income left over after certain monthly expenses are deducted. We can deduct mortgage payments, taxes you pay, medical bills, child care, etc.
If, after these deductions against your income, your “disposable” income meets certain thresholds, you “pass” the means test and can still file a Chapter 7 bankruptcy. These calculations are complex and will require a good deal of information from you. But it can mean the difference between wiping out your debt or not, so it can be an important step.
What Happens if You Fail the Means Test?
If you can’t pass the means test, then a Chapter 7 bankruptcy may not be for you. But there are other options, including debt settlement or a Chapter 13 bankruptcy. We often recommend our unique debt settlement program, which is actually is an alternative to bankruptcy. Under some circumstances, a Chapter 13 bankruptcy may be appropriate.
Find out your options in a free consultation.