Jeffrey P. Judge Bankruptcy Law Blog on Lawyers.com

People often assume that they can no longer apply for Chapter 7 bankruptcy. But the fact is federal law still protects your ability to file for personal bankruptcy, as long as you are not acting in “bad faith.” What’s changed is that the steps may be more complex and some of the qualifications more difficult if you are looking for Chapter 7 bankruptcy in Tucson or elsewhere in Arizona.

According to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Chapter 7 involves the complete liquidation (sale) of a person’s property and the use of that money to repay creditors. In other words, the debts are wiped out and the debtor starts fresh.

If you need to file for bankruptcy protection in Tucson or Southern Arizona, you must determine which type of bankruptcy you qualify.  A Chapter 7 bankruptcy is generally preferred because it is a quicker, easier and less expensive form of bankruptcy.  But if your income is too high, you may not qualify for Chapter 7 bankruptcy protection to discharge your debts.  Instead, you would file for Chapter 13 protection and begin a court approved repayment plan. 

To qualify to file for Chapter 7 bankruptcy, you must pass a “Means Test.”  The complete test has three parts and looks at your household size, and total household income and expenses, and is complicated.  However, most people do qualify under the first part of the test which looks at only your household size and total pre-tax income over the last six months (all sources of income, including child support, government assistance, pension, ect….)

In Arizona, you probably qualify for Chapter 7 bankruptcy protection if your total monthly income over the last six months falls below the following household guidelines:   

One person household with an average monthly income $3,616 (annual income $43,397) Two person household with an average monthly income $4,802 (annual income $57,620)
Three person household with an average monthly income $5,167(annual income $62,002)
Four person household with an average monthly income $5,989 (annual income $71,867)
Five person household with an average monthly income $6,564 (annual income $78,767)
For larger household sizes, you can check the means test table ony my website.

Even if your income is over the limits listed above, you may still qualify for Chapter 7 protection, but you must pass the second and third parts of the “Means Test”.  The second and third parts look at your household expenses to determine what kind of payment you could afford to make in the Chapter 13 repayment plan.  It is very complicated, and you should consult an experienced bankruptcy attorney to perform this analysis.

Filing for personal or business bankruptcy can be one of the biggest decisions you make in life. Don’t jump to any conclusions. First seek legal advice and counseling from a bankruptcy attorney familiar with bankruptcy litigation. Determine if bankruptcy is right for you or if alternatives are available.

For a Tucson bankruptcy law firm contact Jeffrey Judge of the Judge Law Firm, 1647 N. Alvernon Way, Suite 1 Tucson, AZ.