Bankruptcy Means Test

The Arizona Bankruptcy Means Test

In order to file a Chapter 7 bankruptcy you must qualify.  Qualifying for chapter 7 bankruptcy requires looking at your median income first.  If your median income for your family is higher than what is allowed, then you must pass the Arizona means test in order to even file a chapter 7 bankruptcy.  The good news is that if your income is below the Arizona median for your household size you are exempt from the Arizona means test and may immediately file a Chapter 7 bankruptcy.

The means test calculation is really just a tool used by the new bankruptcy laws to determine if you can pay back a portion of your unsecured debts through a Chapter 13 bankruptcy.

Arizona Means Test Exemptions

There is some great news for some of us out there that completely removes the requirement of even doing the means test!  For example, if your debts are not primarily consumer debts then you are exempt from the means test.  So for example, if you are a business owner and your debts are primarily business debts then you are exempt form having to pass the means test.

Another great exemption is for those who are disabled veterans AND your debt was incurred primarily during active duty or while performing a homeland defense activity.

It is important to speak with a qualified Arizona bankruptcy lawyer to find out how the means test applies to you and whether or not an exemption can be used in your chapter 7 bankruptcy.

So What is the Arizona Median Income?

Simply put, each county has a median income figure based on your family size.  If your currently monthly household income is less than the Arizona median income for a household of your size, in your county, then there is a presumption that you pass the means test and are eligible to file a Chapter 7 bankruptcy.

Here is how your average (or median) household income is calculated: Take all of your monthly income over the last six calendar months and average it out.  You either over or under.  You can check below to see the updated Arizona Median Income numbers.  If you are over the median income limit then you must pass the means test.  If you are under the limit then you don’t have to pass the means test.  However, if you are over the median income limit and your income has declined over the last six months, then hopefully your bankruptcy lawyer told you how waiting one or more months might bring your income under the median level for Arizona.  Strategy as to when to file and when wait can make a HUGE difference in your eligibility to file chapter 7 bankruptcy.  The final calculation is made by taking your average monthly income and multiplying it by 12 to determine your annual income for the purpose of Arizona median income test. Check out the current and updated annual means test median income figures below for Gilbert Arizona, Maricopa County:

HH Size Monthly Income 6 Mo. Total Annual Income
1 $4,257 $25,543 $51,086
2 $5,308 $31,849 $63,698
3 $5,774 $34,642 $69,284
4 $6,586 $39,513 $79,026
5 $7,286 $43,713 $87,426
6 $7,986 $47,913 $95,826
7 $8,686 $52,113 $104,226
8 $9,386 $56,313 $112,626
9 $10,086 $60,513 $121,026
10 $10,786 $64,713 $129,426

*Chart is adapted from here.

Arizona Bankruptcy Means Test

After reviewing the chart above to see where your average income is, then you must pass the means test only if your average income for your household is greater than the average listed here. If your income is over the Arizona median income for a household your size then you must complete the means test by calculating your income and your allowed expenses.  Yep, only the “allowed expenses” can be calculated.  A classic example is a grocery bill of $4,000 per month for a family of 3.  There is no way that groceries should cost a family that much.  The court has guidelines as to what categories of expenses are basic and necessary as well as amounts which should be followed.  Like any other law, there area always exceptions to this and you definitely need to speak with one of our qualified Arizona bankruptcy lawyers to find out if your family is fully using the allowed expenses appropriately.

You can check out the means test calculator right here and give it a shot to see if you qualify for a chapter 7 bankruptcy.  **HUGE WARNING- like any math calculation, if you put in wrong information or inaccurate information then you will get wrong and inaccurate answers.  It is always best to let one our amazing Arizona bankruptcy lawyers do this calculation for you.

In order to get as accurate as possible you will need to gather up some important documents. These include almost all of sources of income you may have including, but not limited to, business income, rental income, interested and dividends, pensions and retirements plans, amounts paid by others for your household expenses, and unemployment income.

The basic gist is that you can qualify for your chapter 7 bankruptcy by passing the Arizona bankruptcy means test.  This is what it looks like to pass: Subtract all of your allowed expenses for Arizona from your income.  This amount of income is used to determine whether or not you can file a chapter 7 bankruptcy right now, or whether you have too much left over income and therefore must file a chapter 13 bankruptcy.  A chapter 13 bankruptcy is where you take the left over income and pay it back to your creditors for pennies on the dollar over 60 months.

The amount of left over income required to force you into a chapter 13 is very case specific depending on your family size and special circumstances.  Contact us today and we will help figure out whether or not you qualify for chapter 7 bankruptcy through the Arizona means test.

Finally, watch out for the typical bankruptcy law firm who is volume based.  The sad truth in our industry is that most bankruptcy lawyers are lazy and take the easy way out every time.  They rely on volume and pump out bankruptcy cases like some sort of mill.  For example, just because your average income is too high doesn’t mean you have to file a chapter 13 bankruptcy!  That is why we have the means test.  And just because you fail the means test doesn’t mean you have to file a chapter 13 bankruptcy!  The best Arizona bankruptcy lawyers will take the time to understand why your income and expenses are not allowing you to qualify for a chapter 7, and then work with you doing some pre bankruptcy planning.  In time (usually a few months is all) you can legally make changes to your income and expenses that in fact allow you to pass the means test.  Run away from any lawyer you might see on a billboard, T.V. commercial, radio add, or side of a bus.  These volume based bankruptcy firms usually charge almost double what we charge and they intentionally do half of the work we do.  They just want to file your case quickly as a chapter 13 even if with some work you could have been a chapter 7.

HELP ME WITH THE MEANS TEST

Get Legal Help with Your Arizona Bankruptcy Means Test

The attorneys at Dodge & Vega, PLC, have over 35 years of combined experience and are devoted to doing all they can to help you. We are not your typical lazy law firm who over charges their clients.  Our fees are almost half of what everyone else charges and we work twice as hard to make sure that you can qualify for a chapter 7 bankruptcy.  Our firm is A rated by the Better Business Bureau and has achieved various professional nominations and recognitions. We serve individuals, families and business both small and large and take the time to understand the unique situations and needs of our clients. We pride ourselves on being different than the typical attorney, offering personalized service and tailored assistance driven by our genuine desire to help you achieve a better life.

When your life is a constant struggle to make ends meet, somehow pay your bills, cope with persistent creditors and beyond all this, simply stay afloat, you need to take decisive action. You may even be at risk of losing your home or investments, repossession, wage garnishments and more. Simply continuing on as exorbitant interest continues to accrue and you go without life’s necessities will not lead you out of this very stressful and precarious situation. You do have options under the law and it is imperative you take prompt action before matters get even worse. A bankruptcy attorney can review your personal circumstances and help you to determine the best course of action to help you make a fresh start.

We are one of the best Law Firms in the Arizona

If you want to be represented by the best law firm for your case then do not hesitate and contact us.