Arizona Means Test Median Income For Chapter 7 and Chapter 13 Bankruptcy

The income limits for Arizona bankruptcy are always changing. They are based off of the median income as determined by the United States Department of Justice. You can find a link to the numbers, which change quarterly, here.

Arizona Income Limits for Bankruptcy Explained

Generally speaking, we prefer to have our clients file a Chapter 7 as it is the most efficient, cost effective, and quickest of the bankruptcy options. However, to file a Chapter 7 you must qualify based upon your income. Chapter 13 is great for certain things, and it may be that it will be our advice that you will benefit more from it than a Chapter 7. Again, this depends on your circumstances.

If you exceed the Arizona income limit, it’s possible you may still qualify for a Chapter 7 Bankruptcy. There are a couple of alternative qualifications such as, primarily business debt, or as a veteran with over 30% disability. If these do not apply, the only way to qualify is to go through the means test.

The means test is a complex formula that takes your debt, the IRS tax limits for certain things, your actual expenses on certain things then mashes it all up to spit out a number. This number is then multiplied by 60. If this number is too high, you do not qualify for a Chapter 7. If it is low enough, you can file a Chapter 7.

If you still exceed the limit, even after the means test, you may be required to file for a Chapter 13 bankruptcy.  When you exceed the income limits and fail the test, it is believed that you have the funds to be able to pay back a set percentage to your unsecured creditors (credit cards, personal loans, medical bills).  At least, this is what congress has determined.

How is my Arizona Income Limit Calculated?

When you start filing for your bankruptcy your attorney and paralegal will ask for six months of income; this can be calculated from a variety of sources which include: wages (which includes, overtime, bonuses, and any commissions), self-employment, rentals, unemployment, workers’ compensation, interest, royalties, dividends, annuities, retirements, pensions, disability insurance, child and/or spousal support, and money from a non-spouse – roommate, non-spouse, etc.

Once your legal team has your income, it is then calculated and a median average is created to know your average annual income.   Once that is determined, your income will be compared to the chart below (

 If your income is assumed to be below the number listed then it will be assumed by your legal team that you will qualify for debt relief within a Chapter 7 bankruptcy in Arizona, as long as you pass the other aspects of the Arizona Chapter 7 Bankruptcy requirements. 

Exemptions to the Calculation

Now, there are a few exemptions to the Arizona income limits, this includes what type of debts you have incurred, or if you have a status of a disabled veteran, or if you have been a reservist or a member of the National Guard, so if you have these statuses, please talk to your attorney and let them know at the beginning of the process.

Another exemption would be based on your disposable income (how much money you have left after your expenses each month are calculated, including your payroll deductions), so, if your disposable is below a set level from the state of Arizona, you may still qualify for a Chapter 7 bankruptcy in Arizona. 

To figure out theses exemptions your legal team will ask you for a variety of your monthly expenses, this will include payroll deductions, mandatory retirement savings, food, housing costs, clothing, groceries, utilities, personal care, clothing, variety of health care costs, childcare, tithes, vehicle costs; including upkeep, taxes, and more.  For the trustees’ analysis, these costs need to be reasonable and within normal means.

The Long Story Short on Income Limits

If you are within (or near) the set median (average) income range for the state of Arizona, you should be able to file for a Chapter 7 bankruptcy in the state of Arizona, and you should reach our to Greeves and Roethler to have them assist you, Also, if you are unsure of this, reach out and they will help you make a decision between a chapter 7 or a 13 in Arizona based on your income and disposable income, so be ready to answer questions regarding your income, in all forms, and your monthly expenses.