What is the Means Test for Chapter 7 Bankruptcy in Arizona?
Many debtors in the state of Arizona turn to Chapter 7 bankruptcy as a way to discharge their debt and get a fresh start. This process is not as simple as it may sound, however. In 2005, the Bankruptcy Court devised a “Means Test” under the Bankruptcy Abuse Prevention and Consumer Protection Act. The Means Test is designed to determine if a Chapter 7 bankruptcy filing is “presumed to be abuse.” This is to deter bankruptcy fraud from being committed. Fraud occurs if a debtor has their debts wiped out through Chapter 7 bankruptcy yet still has the money to pay back debts and does not do so. In this case, Chapter 7 bankruptcy is presumed to be abuse.
In Arizona, the Means Test requires that a debtor fall within a certain income level in order to qualify for filing Chapter 7 bankruptcy in the state. The Means Test also determines if a debtor’s income would allow them to pay off some, or all, of their debt. A debtor cannot qualify for Chapter 7 bankruptcy in Arizona unless they pass the Means Test. The only way a debtor could be exempt from the Means Test is if what they owe is not primarily consumer debt (i.e., the debt is due to business holdings or transactions). A debtor might also be exempt from the Means Test if their debt was accrued during military service.
The income level for the Means Test for Arizona is based upon household size. If a debtor’s income falls below Arizona’s median income level for household size, they have passed the means test and may file Chapter 7 bankruptcy in Arizona. Debtors must calculate their monthly income for the six months prior to filing for bankruptcy and compare it to the median income for households of their size in Arizona (2021 figures used below):
| HOUSEHOLD SIZE | MONTHLY INCOME | ANNUAL INCOME |
| 1 | $4653.25 | $55,839.00 |
| 2 | $5831.25 | $69,975.00 |
| 3 | $6296.67 | $75,560.00 |
| 4 | $7142.83 | $85,714.00 |
| 5 | $7892.83 | $94,714.00 |
| 6 | $8642.83 | $103,714.00 |
| 7 | $9392.83 | $112,714.00 |
| 8 | $10,142.83 | $121,714.00 |
| 9 | $10,892.83 | $130,714.00 |
| 10 | $11,642.83 | $139,714.00 |
What Are Allowable Living Expenses in Arizona?
If a debtor’s income is above the median income level per household size in Arizona, they must complete the Means Test Calculation Form. This calculates a debtor’s disposable income by adding up their monthly expenses and subtracting that from monthly income. Debtors must make sure to give correct information for their allowable living expenses (national standards have been established for food, clothing, and other items, as well as for out-of-pocket health care expenses; local standards for housing, utilities and transportation are used). This determines whether that debtor will have money left over to pay down their debt. If a debtor has negative disposable income, they legitimately cannot afford to pay down their debt and qualify for Chapter 7 bankruptcy in Arizona.
What If a Debtor Fails the Means Test for Arizona?
If a debtor fails the Means Test for Arizona, they should review the numbers they used in their calculations. They should also contact an Arizona bankruptcy attorney to see if they have other options to pursue in bankruptcy.
How Does Discharge of Bankruptcy in Arizona Work?
For debtors who pass the Means Test for Arizona and file Chapter 7 bankruptcy, they can expect their Arizona bankruptcy discharge to be issued within four to six months of filing. Bankruptcies are rarely denied by the Arizona Bankruptcy Court. They may be denied if it can be proven that a debtor lied under oath, cannot explain the loss of assets to the Bankruptcy Court, destroyed records, or attempted to defraud a creditor.
