What if I fail the Arizona Means Test?
Failing the Means Test: How to File for Chapter 7 Anyway
The Means Test was designed to weed people out of bankruptcy. Congress feared that people were filing for bankruptcy who could afford to pay off their debts but simply chose not to. In order to keep such fraud at bay, Congress passed additions to the Bankruptcy Code that require every bankruptcy filer to submit their income and expense information to the Bankruptcy Court. If they fail, they are supposed to file for Chapter 13 instead.
This has caused countless issues, and in the end has kept few people from filing for Chapter 7 bankruptcy who really want to. So what can you do if you fail the Means Test but really want to file for Chapter 7?
Although it is important to utilize an experienced attorney to help you figure out how to prepare your Means Test application so that you pass it, you can still qualify even if you outright fail.
Many people fail Part One of the Means Test, during which time your income is compared to the median income in your geographical area for a family of your size. However, many people do not try to pass Part Two.
During Part Two, you subtract your expenses from your income and multiply that number by 60. This basically determines how much expendable income you would have to use to pay creditors over a five year period. If the amount is over $10,000, you must file for Chapter 13. If the amount is less, you can qualify for Part Three of the test.
Under Part Three, if you have less than $100 a month to pay creditors, you can still file for Chapter 7. If you have between $100 and $166.66, the court will analyze the amount of debt you have. If the amount you would pay over 5 years would be less than 25% of the total debt you owe, you can file for Chapter 7. If it is higher, you should file for Chapter 13.
Having an experienced attorney help you calculate your monthly expenses and represent your income and expenses accurately to the court is extremely important in obtaining the result you desire.
Please contact our friendly staff to set up a time to discuss your situation. We can determine if bankruptcy is the correct choice for you and help you move forward.