Arizona Bankruptcy Filing And The Means Test
by John G. Merna
When it comes to filing bankruptcy, whether you prefer a Chapter 7 or a Chapter 13, your monthly income can determine what options you qualify for. To be eligible for a Chapter 7, which eliminates your unsecured debt, your income must be under a certain amount to be eligible. If you are over that income amount determined by the median income in your state for your family size, you will be forced into a Chapter 13 repayment plan. The qualifying thresholds take into account all of the gross household income and the number of household members. This pre-bankruptcy qualifying calculation is called the “Means Test”. Each state determines the income levels that will apply to their residents.
MEANS TEST QUALIFYING AMOUNTS CHANGE
In comparison with other states, the income thresholds in Arizona fall close to the average of the other states in the union. These qualifying numbers do change slightly from year to year as they are revised periodically by the Internal Revenue Service. So it is important to refer the most up to date numbers and more advisable that you have a qualified Phoenix bankruptcy lawyer review them with you.
The Means Test for your household will be based on the last 6 months of all your household income, excluding Social Security income, as measured from the last day of the month prior to filing your bankruptcy back six months. This gross income (pre-tax) is doubled to determine your annual income for Means Test purposes. This number needs to be below the state median income for your household size.
Currently, the guidelines for Arizona are (effective 12/2016):
Household size Median Income
- 1 $45,998
- 2 $56,418
- 3 $60,464
- 4 $71,280
- 5 $79,680
- 6 $88,080
- 7 $96,480
- 8 $104,880
- 9+ For every household member over 8, add $8,400 per person.
If the initial calculation shows that you are over the state median income, there is a second chance to qualify for a Chapter 7. The next test would be to calculate your disposable income. Disposable income is the income left over after certain allowable monthly expenses are deducted. These expenses include: secured debt monthly payment, taxes that are deducted from your pay, involuntary retirement contributions, expense for uniform, child care and many other expenses a qualified Phoenix bankruptcy attorney will be aware of. If the disposable income amount falls under the state’s requirement after these deductions, you may still be eligible to file a Chapter 7 bankruptcy.
Calculating whether you are under the Means Test can be complicated, so it is best to seek the advice of an experienced and knowledgeable Phoenix bankruptcy attorney. Our offices service the Tempe, Mesa, Chandler, Gilbert, Surprise, Glendale, Scottsdale, Peoria and many more cities in the Phoenix metropolitan area.
Give us a call today to speak with a qualified bankruptcy lawyer about a free bankruptcy consultation on what bankruptcy chapter your qualify for. Call us today at 800-662-8813. Ask about out payment plans. We will put you on the road to a fresh financial start today.
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