Many people are aware that sweeping changes were made to the bankruptcy code in 2005. One of the biggest was the institution of the “means test” to determine eligibility to file for Chapter 7 bankruptcy protection. The “means test” was intended to push individuals with higher incomes toward a chapter 13 bankruptcy, where individuals repay a portion of their debts through a 3 to 5 year chapter 13 plan payment. This long repayment does not exist in Chapter 7 cases.

In order to help determine who was eligible for Chapter 7 and who had to file Chapter 13, an income based test was introduced. (It should be noted that the means test is very complicated and has many nuances so it is best to speak with an attorney about your specific situation.) As a first step, the gross household income and the number of individuals in the household are looked at and compared to “median family income” numbers for the area in which you live. If your household income is below the median income for the same size household, you are generally eligible to file Chapter 7.

One of the things Congress built into the bankruptcy code in 2005 is a periodic update to the “median family income” numbers that your household income will be compared to. As a result of increased and prolonged unemployment, “median family income” in Arizona continues to decline. Therefore, when the numbers update again on November 1, 2011, more families and individuals in need of bankruptcy protection will find themselves above the “median family income”. For example: The following table shows the current numbers and the numbers that will go into effect on November 1, 2011.

Household        Current        Nov. 1, 2011
1                        $42,603         $41,385
2                        $55,404         $53,781
3                        $59,659         $56,508
4                        $67,113         $61,267
5                        $74,613         $68,767
6                        $82,113         $76,267
If you are over these income numbers for your household size, there may be other ways to still qualify you for a Chapter 7 case if that is in your best interest. If you have questions about bankruptcy, we encourage you to attend one of our free seminars or contact us for a free personalized consultation. For more information about our seminars please visit