In order to qualify for Chapter 7 bankruptcy, you must take a “Credit Counseling Class” and pass what is called a “Means Test.” Please, don’t get overly worried. You will not be prevented from filing bankruptcy because you didn’t understand enough of the material in the Credit Counseling Class to pass the Means Test. In fact, it’s not a test at all, but an opportunity to determine how much disposable income you have. Disposable income is the money you have left over after you pay all of your monthly bills and expenses.
What is The Means Test?
The Means Test is a two-tiered account. The first tier is simple and most people who qualify for Chapter 7 bankruptcy qualify under the first tier. It’s as easy as combining your gross monthly (or yearly) household income and comparing it to the Median Household income for your size of household. If your income is below the median household income for your household size, then it is assumed that you qualify for Chapter 7 and there is no need to complete the second tier of the test.
However, the second tier of the test actually deducts monthly expenses from you gross monthly income to determine if you have sufficient disposable income to pay something to your creditors. If you have little to no disposable income after deducting all the allowed expenses, you can still qualify for Chapter 7. Otherwise, you should file Chapter 13.
(Below is the Median Household Income Chart as of November 1, 2011)
|Size of Household||1 person||2 people||3 people||4 people||5 people||6 people|
Household Income (yearly)
Household Income (monthly)
Add $7,500 for each individual in excess of 6 (effective November 1, 2011).
Get Help From an Expert
If you have any questions about Credit Counseling, the Means Test, or you need assistance figuring out which chapter of bankruptcy you qualify for, I suggest you speak with an experienced Arizona bankruptcy attorney. Call (480) 648-8975 to schedule your FREE consultation.