Article By: Whitney G. Coats, J.D., Scottsdale Bankruptcy Attorney
The Means Test is a calculable test devised to determine if an individual filing bankruptcy does not make enough income to pay their debts and therefore is a good candidate for filing a Chapter 7 bankruptcy. Sometimes a potential filer makes too much money and is not eligible to file a Chapter 7 bankruptcy, though they may be able to file a Chapter 13 bankruptcy or seek some other alternatives to address their financial hardships. The Means Test calculates the average Gross Income for the filer’s household, using all sources of income received by the filer’s household for the six (6) months prior to the filer’s bankruptcy petition file date, not including the month the petition is filed. A filer is allowed a higher threshold for income with each dependent who resides in the household who is supported financially by the filer. The Means Test allows certain IRS Standardized Deductions and other mandatory expenses, including secured debt expenses, to determine if a person’s Disposable Income is either under the allowed median average for the state upon which the filer resides, or is still within an allowed range that it’s clear the filer will not be able to pay their debts and therefore is still eligible to file Chapter 7 bankruptcy.
The Means Test threshold numbers for each state are set by the Office of the United States Trustee and change periodically through the year. Sometimes the revised Means Test threshold numbers can help a person’s eligibility to qualify for a Chapter 7 bankruptcy and sometimes it can throw them out of qualifying. On April 1, 2014, the Mean Test numbers were revised upwards, which results in an increase in the allowed Gross Income a filer can earn for their household to be eligible for the Chapter 7. The State of Arizona’s current Means Test threshold numbers for a one (1) person household to a four (4) person household are as follows:
New Means Test Number Effective April 1, 2014:
Number of People Annual Monthly Median
In Household Gross Income Average Gross Income
1 $42,508.00 $3,551.00
2 $55,828.00 $4,652.00
3 $57,331.00 $4,778.00
4 $65,550.00 $5,463.00
If you are considering filing a Chapter 7 bankruptcy and your annual or monthly Gross Income is under the above listed amounts for the number of people in your household, then you may want to further inquire into filing a Chapter 7 bankruptcy. If you make more than the above listed Gross Income amounts for the number of people in your household, there is still a range that you may be eligible to file a Chapter 7 bankruptcy, however, a qualified attorney will need to review the necessary documentation to calculate your Means Test to determine if you are in fact eligible or need to consider filing a Chapter 13 or pursue other options. Please contact my office if you are considering filing a Chapter 7 bankruptcy but unsure whether you actually pass the Means Test calculation in order to do so.