What is the Arizona Bankruptcy Means Test?

Arizona Bankruptcy Means Test - Davis Miles McGuire Gardner, PLLC

According to the United States Bankruptcy Court, District of Arizona:

As part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which became effective on October 17, 2005, a “means test” was instituted to determine whether or not a debtor is entitled to a Chapter 7 discharge, or whether such debtor must convert the case to one under another chapter of the Bankruptcy Code. The basic purpose of the means test is to compare monthly income and expenses to determine whether or not a Chapter 7 discharge would constitute an “abuse” of the provisions related to Chapter 7 in the Bankruptcy Code.

In other words, when you file for Chapter 7 bankruptcy in Arizona, you must meet some requirements in order to qualify for a discharge of your debt. Passing the Arizona Bankruptcy Test is the only way to qualify for Chapter 7 Bankruptcy. If you do not qualify for discharge, you may be able to file bankruptcy under another chapter of the Bankruptcy Code.

If you’re filing for bankruptcy in Phoenix, you need the best bankruptcy attorney in Phoenix.

One of the biggest mistakes people make when filing for bankruptcy in Phoenix is not consulting with a Phoenix bankruptcy attorney before filing.

A Phoenix Bankruptcy Lawyer can help you:

  • Decide if bankruptcy is right for you
  • Choose the right chapter to file under
  • Make the process go smoothly and fast
  • Answer any questions you may have regarding bankruptcy, your credit, etc.
  • Understand how bankruptcy may affect your family
  • Make the best decisions for your finances and your future

Here’s how the Arizona Bankruptcy Means Test works:

In order to qualify for bankruptcy under chapter 7, you’ll need to take the Arizona Bankruptcy Means Test.

Please Note: The Means Test only applies to higher incomes. If your income is below the Arizona median for your household size, you are exempt from the test. You may then go ahead and file for Chapter 7 bankruptcy.

  • You will need to calculate your income for the past six calendar months.
  • Take that number and average it, then annualize it.
  • Then go ahead and compare it to the Arizona median income for your household size.
    If you’d rather use a calculator to help you along click here.
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Source: US Census Bureau

Median Household Income in Arizona in 2016 was $49,328.

If your income is less than the median, you qualify for Chapter 7 Bankruptcy and meet the requirements of the “Arizona Bankruptcy Means Test.”

What’s the next step?

After determining income qualifications, you will either:

  • Not qualify and need to talk to your Phoenix bankruptcy lawyer about other options
  • Qualify and need to fill out a Form B122A-2

In order to fill out the Form B122A-2, you will need to provide your completed copy of Chapter 7 Statement of Your Current Monthly Income (Official Form 22A-1). In this form, you’ll determine your adjusted income and calculate your deductions from your income.

After that, you can go ahead and fill out Form B122A-2.

Arizona Non-Dischargeable Debts

It’s important to note that not all debts are dischargeable in Arizona. Below is a list of debts that may not be discharged under Chapter 7 or Chapter 13 bankruptcy. Also, please remember that any secured debts (home or car payments) must be continued if you intend to keep that property.

If you file under Chapter 7, you will still be responsible for the following debts after your discharge:

  • Back child support, alimony obligations and other debts dedicated to family support.
  • Debts for personal injury or death caused by driving while intoxicated.
  • Student loans, unless it would be an undue hardship for you to repay.
  • Fines and penalties for violating the law, including traffic tickets and criminal restitution.
  • Recent income tax debts (within 3 years) and all other tax debts.
  • Debts you forget to list in your bankruptcy papers, unless the creditor learns of your bankruptcy case.

In addition, certain debts may be declared non-dischargeable by a Chapter 7 bankruptcy judge if the creditor challenges your request to discharge them:

  • Debts you incurred on the basis of fraud.
  • Credit purchases of $1,150 or more for luxury goods or services made within 60 days of filing.
  • Loans or cash advances of $1,150 or more taken within 60 days of filing.
  • Debts from willful or malicious injury to another person or another person’s property.
  • Debts from embezzlement, larceny or breach of trust.
  • Debts you owe under a divorce decree or settlement unless after bankruptcy you would still not be able to afford to pay them or the benefit you’d receive by the discharge outweighs any detriment to your ex-spouse (who would have to pay them if you discharge them in bankruptcy).

Talk to an Arizona Bankruptcy Lawyer in Phoenix About Your Bankruptcy Situation

Struggling with bankruptcy in Phoenix? You don’t have to struggle – simply call the Phoenix bankruptcy lawyers at Davis Miles McGuire Gardner, PLLC. Our team of bankruptcy attorneys is knowledgeable and highly experienced with Arizona bankruptcy cases. If you’re worried about your Arizona bankruptcy, schedule a consultation with one of our excellent bankruptcy attorneys in Phoenix today.