A Step-by-Step Guide to Understanding a Means Test
How To Pass The Chapter 7 Means test In Arizona
Most people are thinking of Chapter 7 bankruptcy when they think of bankruptcy. This is the chapter of bankruptcy that allows you to discharge all of your unsecured debt, such as credit cards, medical bills, and personal loans. It also provides an exemption for personal property, such as your home or vehicle, and the amount often lets most people keep these assets after filing for bankruptcy.
Unfortunately, simply deciding that it’s time to file for bankruptcy won’t be enough to do so. If you want to file for Chapter 7 bankruptcy in Gilbert, you must qualify to do so by passing what is know as the “means test.” You can look at charts online, but the best way to know if you pass the means test is to talk with a Gilbert bankruptcy attorney who can analyze your finances.
What Does the Means Test Measure?
Essentially, the means test is trying to determine your ability to pay back your debts. It does so by comparing your income to your expenses and calculating your total disposable income each month. If the court decides that you have enough disposable income to pay your debts, you will not be allowed to file for Chapter 7 bankruptcy.
You may feel that you do not have enough money left over each month to pay your debts, but the courts may not agree. The means test is meant to provide a fair measurement for making the determination.
One of the most important criteria in the means test is how much money you make. Your income will then be compared to the median income in Arizona. If your income falls below the state median for a household of your size, you automatically qualify to file for Chapter 7 bankruptcy.
In 2020, median income in Arizona was as follows:
- 1 person in household – $4,359.92 monthly income, or $52,319 annually
- 2 people in household – $5,476.08 monthly income, or $65,713 annually
- 3 people in household – $5,975.33 monthly income, or $71,704 annually
- 4 people in household – $7,245.83 monthly income, or $86,950 annually
- 5 people in household – $7,995.83 monthly income, or $95,950 annually
- 6 people in household – $8,745.83 monthly income, or $104,950 annually
- 7 people in household – $9,495.83 monthly income, or $113,950 annually
- 8 people in household – $10,245.83 monthly income, or $122,950 annually
- 9 people in household – $10,995.83 monthly income, or $131,950 annually
- 10 people in household – $11,745.83 monthly income, or $140,950 annually
This part of the means test is the most straight-forward, so if you can pass on income alone, that will make this a much simpler process.
If you do not pass the means test on income alone, all is not lost. The next step is to look at your disposable income to see if you qualify for Chapter 7 bankruptcy.
For this part of the means test, you will need to list all your expenses, including your housing, utilities, food, child care, medical expenses, and more. For some categories, you will only be allowed to enter a standard deduction. For others, such as child care, you will need to list the actual expense. This is a more complicated part of the means test, and your bankruptcy attorney will help you through it so you understand how to record expenses and how to interpret the test.
Your Gilbert bankruptcy attorney will help you learn right away if you are able to pass the means test for Chapter 7 bankruptcy. If you do not qualify for Chapter 7, that does not mean that you cannot get the debt relief you need through bankruptcy protection. You can most likely still file for Chapter 13 bankruptcy, which will restructure your debt into a limited repayment plan that you can afford.
Call Gilbert Bankruptcy Lawyers to determine whether you can file for Chapter 7 bankruptcy or to learn about your debt relief options through Chapter 13 bankruptcy. Our attorneys will analyze your finances to see if you pass the means test and to recommend the best course of action for maximum debt relief through bankruptcy. Our goal is to help you get the fresh start you need quickly. Call us in Gilbert today to schedule a consultation with an experienced bankruptcy lawyer and learn more.