Means Test

What is the Bankruptcy Means Test?  Arizona Bankruptcy Attorneys of Ariano & Reppucci

If you are looking to file a Chapter 7 bankruptcy you probably have many questions about whether or not you qualify. Chapter 7 bankruptcy can help you  repay some of your debts by allowing the bankruptcy trustee to sell your nonexempt assets and use the proceeds to pay your creditors according to the Bankruptcy Code.1

There are many hoops to jump through if you want to qualify for Chapter 7 bankruptcy, such as credit counseling and determining whether you have a previous bankruptcy discharge. However, one of the major requirements for Chapter 7 bankruptcy is that you pass the means test. Specifically, in 2005 Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which made the means test more strict.2 The Act gave the U.S. Bankruptcy Trustee program many responsibilities, including implementation of the “means test” and supervision of audits to determine whether your bankruptcy documents are accurate.3

How is the Means Test Calculated?

This test compares your monthly income to the Arizona median family income for a family of your size.4 If your monthly income is more than the Arizona median, then you may not qualify for a Chapter 7 bankruptcy.5 Specifically, the test requires that over half of your debt come from consumer purchases rather than business, tax, or tort debts such as injuries you caused to someone else.6

Median income varies by state and household size.7 For example, the Department of Justice released that in Arizona the median income for a single individual is $42,107 for cases filed on and after May 1, 2013.8 Similarly, a family of four have a median income of $61,023.9 For families with over eight people, there is an extra $8,100 added to the median income for each additional person.10

My Monthly Income Exceeds the Median Income. What Now?

If your monthly income is more than the median income for your household in Arizona, the test becomes a little more complicated. You may still qualify for a Chapter 7 bankruptcy if you provide more detailed information about your expenses and secured debts on a Form 22A.11 This form contains a list of expense categories such as food, housing, and childcare where you put the amount you actually spent or some predetermined amount.12 Since the figures differ by region, you will need to visit the U.S. Bankruptcy Trustee website.13

Alternatively, if you do not pass the means test, you may still be eligible for Chapter 13 bankruptcy. Call us to speak directly with one of our experienced and dedicated Arizona bankruptcy attorneys and see if you qualify for Chapter 7 or Chapter 13 bankruptcy.

  • [1] Liquidation Under the Bankruptcy Code, uscourts.gov, http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspxv (last visited Feb. 23, 2014).
  • 2 Bankruptcy Reform, Justice.gov, http://www.justice.gov/ust/eo/bapcpa/ (last updated Aug. 7, 2012 2:21 PM).
  • 3 Id.
  • 4 LaToya Irby, How to Qualify for Chapter 7 Bankruptcy, credit.about.com, http://credit.about.com/od/bankruptcy/tp/qualify-chapter-7-bankruptcy.htm (last visited Feb. 21, 2014).
  • 5 Id.
  • 6 Id.
  • 7 Kathleen Michon, The Bankruptcy Means Test: Are You Eligible For Chapter 7 Bankruptcy?, Nolo.com, http://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-means-test-eligibility-29907.html (last visited Feb. 23, 2014).
  • 8 Census Bureau Median Family Income By Family Size, justice.gov, http://www.justice.gov/ust/eo/bapcpa/20130501/bci_data/median_income_table.htm (last visited Feb. 21, 2014).
  • 9 Id.
  • 10 Arizona Median Incomes, jacksonwhitelaw.com, http://www.jacksonwhitelaw.com/arizona-bankruptcy/arizona-bankruptcy-means-test/ (last visited Feb. 21, 2014).
  • 11 Kathleen Michon, Filing for Bankruptcy in Arizona, Nolo.com, http://www.nolo.com/legal-encyclopedia/filing-bankruptcy-arizona.html (last visited Feb. 23, 2014).
  • 12 Id.
  • 13 Id.; see also U.S. Trustee Program, justice.gov, http://www.justice.gov/ust/ (last visited Feb. 23, 2014).