Means Test

When filing Chapter 7 bankruptcy in Arizona, individuals or couples must meet a qualifying test known as a Means Test. This test is a straight-forward determination of who qualifies for bankruptcy protection under the Chapter 7 bankruptcy statutes.

Arizona Bankruptcy Code Means Test:

Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor’s aggregate current monthly income over 5 years, net of certain statutorily allowed expenses is more than (i) $11,725, or (ii) 25% of the debtor’s non-priority unsecured debt, as long as that amount is at least $7,025*. [These numbers adjust periodically].

The means test reviews your income, assets, and debts to confirm that you meet the qualifications for Chapter 7 bankruptcy. If you do not, then there are forms of individual Chapter 11 bankruptcy or Chapter 13 bankruptcy that should be available to you. To find out if you qualify, make certain to provide a truthful accounting of income, assets, debts, and liabilities.

Means Test Determination: Income and Assets

It is important to list ALL of the income and assets that you have. While it may be tempting to leave out assets or income to meet the thresholds, this is not a good idea for two important reasons:

  1. To knowingly lie is to commit perjury. You will have to swear an oath in court that you provided true, accurate, timely information in the paperwork.
  2. The case can be dismissed and you may be barred from any future filing on those debts if it is determined that the information in the bankruptcy filing is not true and accurate.

Means Test Determination: Debts and Losses

You must fully explain all of your debts and account for the location of all assets and money before you file for bankruptcy. While it might seem tempting to give away assets or money to friends and relatives, or to conceal losses such as gambling, these omissions could also lead to perjury or to dismissal of the case. You also MUST list all creditors, even if you intend to continue to pay them after a discharged has been received.

Filing for Chapter 7 bankruptcy if you do not meet the qualifications can have complicated consequences. It is helpful to consult with a bankruptcy attorney to be certain that you qualify for bankruptcy protection or to explore any other options that might better fit your circumstances.