Why Can’t I File A Chapter 7?

Most debtors who file for bankruptcy under Arizona bankruptcy laws have the choice of filing under Chapter 7, a liquidation bankruptcy, or Chapter 13, a wage-earner plan. However, in some cases, the debtor is forced to file a Chapter 13 because he or she does not qualify for a Chapter 7. If you have been told you cannot file Chapter 7, the following may be the reasons why:

• You make too much money. There is an income limit under Chapter 7 law that disallows a Chapter 7 filing if you make too much money. Currently, Arizona allows a single person to make no more than $41,993.00. The income limits increase with the number of qualified people in the household; for example, a two-member household has an income limit of $55,022.00, a three-member household has an income limit of $56,503.00, and a four-member household has an income limit of $64,604.00. The income limits continue to increase until you reach a 10-member household with $113,204 in income; after that, the income limit is set at $113,204 no matter how many members reside in the household.
• You have too little debt. Even if you fail the income test, you may still qualify for a Chapter 7 bankruptcy if you pass the “means” test. This is a test of your income versus your expenses. If the disposable income you have after subtracting qualifying expenses from your income equals $7,475 per year or less, you pass the means test and may file Chapter 7. If your disposable income is more than $12,475 per year, you may not file Chapter 7, no matter what your income. Debtors with a disposable income that falls between $7,475 and $12,475 per year may need to complete further tests to see if they qualify.

Should I File Chapter 7?

Before you decide whether you are eligible to file Chapter 7, you might want to think about whether it is the best type of bankruptcy for you. If you have valuable assets that you want to keep, a Chapter 13 bankruptcy may be a better choice. The attorneys at the Oswalt Law Group in Phoenix are happy to help you decide on the right type of bankruptcy for your needs.