The Means Test in Arizona
Are You Eligible for Chapter 7 Bankruptcy?
Bankruptcy can be a highly efficient method of finding relief from seemingly
unsurmountable debt. However, as part of an effort to discourage abuse
of the system, the federal government has imposed regulations on eligibility
for certain forms of bankruptcy. For example, in order to file for
Chapter 7, which allows debtors to wipe out certain debts altogether, individuals
must pass a means test.
At Leonard V. Sominsky, ESQ., PC, our
Phoenix bankruptcy lawyers want to help you determine your eligibility for a clean slate. Leonard
Sominsky is dedicated to helping all of our clients find debt relief with
high-quality legal counsel at affordable rates.
Mr. Sominsky has personally helped over 1,000 people in Arizona over his career. He has a comprehensive knowledge of bankruptcy
rules and regulations, so you can feel confident knowing that your case
is in good hands.
Qualifying for Chapter 7 Bankruptcy
In order to be eligible for Chapter 7 bankruptcy, you must pass the means
test, which is designed to ensure that the system is only used by individuals
who realistically cannot afford to pay off their debts. Individuals who
do not pass the means test may file for
Chapter 13 bankruptcy to repay a portion of their debts over time, but are not eligible
for the clean-slate option that Chapter 7 affords.
There are three scenarios in which you would not have to pass a means test:
- You are a disabled veteran and incurred debts while on active duty
- You are a member of the military reserve or National Guard
- More than half of your debts are non-consumer or incurred through a business
What Is the Means Test?
The means test is a formula based on the median income in Arizona to determine
whether or not you have funds available for debt repayment. If your monthly
income is less than the median, you automatically qualify for Chapter
7 bankruptcy and no further calculations are required. If your monthly
income is greater than the median, you will need to calculate your expenses
to determine your amount of "disposable income." The calculations
can be complicated to complete, but there are options for online calculators
that can help you through the process.
You will need to calculate your total income (wages, spousal support, etc.) minus:
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Taxes according to your marital status, dependents, and deductions
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Daily household expenses for food, supplies, clothing, etc.
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Healthcare costs for you and members of your household
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Housing and utilities including rent and mortgage
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Transportation expenses including gas or public transportation
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Vehicle payments whether owned or leased
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All insurance costs including life, healthcare, disability, etc.
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Any court ordered payments such as child or spousal support
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Childcare costs for non-educational childcare
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Miscellaneous expenses for education, energy, protection, etc.
The number you are left with is your disposable income.
If your disposable income is not enough to cover a portion of the debts
that you owe over a five-year repayment plan, you have passed the means test.
Our Phoenix bankruptcy lawyer understands how complicated and overwhelming
it can be to compute your disposable income. We want to help ease the
stress of determining your eligibility and can assist you in completing
the necessary calculations.
Handling Bankruptcy Cases for 15 Years
If you are considering filing for Chapter 7 bankruptcy and want to know
whether or not you are eligible, we can help you understand the regulations.
More than that, we help understand
if you should file for Chapter 7 bankruptcy. Our Phoenix bankruptcy attorneys
want to make sure you select the best option for your financial future.
At Leonard V. Sominsky, ESQ., PC, we have an extensive knowledge of how
to complete calculations for the means test and want to help you determine
if this is the right step.
Contact us today to learn more about your options for bankruptcy!