Before you can file for bankruptcy under Chapter 7, you must the income eligibility requirements. One of these requirements is not having too much disposable income.
The way to see if you make too much income to use Chapter 7 is the means test. In this post we discuss how the Chapter 7 means test calculation works.
If you want to know for sure if you qualify for Chapter 7 bankruptcy, please call Stone Rose Law at (480) 739-2448.
The means test comes in two parts.
The first part is income-based.
It compares your household income against the median income for the state you live in, taking into account your household size.
The second part applies only if your household income is more than the state median income for a household the same size as yours.
Based on census data, each state has its own annual income against which to apply the means test. The United States Census Bureau updates this data multiple times each year.
In Arizona, for Chapter 7 petitions filed after April 1, 2025, the median annual income is:
| Annual Median Income | Median Monthly Income |
| $70,919 for one person | $5,909 |
| $85,476 for a two-person household | $7,123 |
| $102,909 for a family of three | $8,576 |
| $113,286 for a family of four | $9,441 |
The bankruptcy court will consider your average gross monthly income for the six months before you file your Chapter 7 petition. This is before taxes and deductions. In Arizona, If you are married, this includes your spouse’s gross income even if they at not filing with you.
Once you know what the Arizona average median monthly income is, you can calculate your average income:
If your monthly gross income during this period is below the median income level, you do not need to pass the means test.
If it is more than the Arizona median income for your household size, you will need to take the means test unless an exception applies (see below).
There are three exceptions to the means test:
If your monthly income exceeds the state median, you must take the Arizona means test using bankruptcy forms, including Official Form 122-A, Official Form 106I for monthly income, and Official Form 106J for monthly expenses.
These forms consider your current monthly income, assets, and expense information to calculate whether you have enough money to pay your creditors.
You will fill out Forms 106I and 106J even if you pass the means test above.
The bankruptcy court will use the information on these forms to decide if you have enough money to pay your creditors. If it concludes that you do, you may need to convert your case to a Chapter 13 bankruptcy.
Here are some specific considerations when you are identifying your monthly expenses.
Allowable paycheck deductions include taxes, Social Security withholding, insurance, health savings accounts and flex savings accounts, and retirement savings like 401(k) contributions.
These are all considered allowable expenses.
Wage garnishments are not allowable deductions.
Necessary expenses are deductible from your household income.
Examples include:
Monthly child support and alimony payments are allowable expenses. This is because they are not dischargeable in bankruptcy.
What regular living expenses you can offset against your income depends on the kind of expense. Some living expenses are calculated on a national basis, while others are more locally-based.
The U.S. Bureau of of Labor Statistics Consumer Expenditure Survey collects statistical data nationwide. Examples include:
Local standards can vary based on factors relevant to where you live. Examples of expenses based on local standards include:
Secured debts that are not discharged in a bankruptcy are allowable expenses. These include car and mortgage payments.
Monthly tax payments to catch up on tax debts are also allowable expenses.
If your monthly expenses exceed your monthly income, you will likely qualify for Chapter 7.
As long as you pass the means test, Chapter 7 relief is available no matter how much you owe. There is no minimum debt to file nor a debt limit.
If you do not pass the means test, you will be ineligible to use Chapter 7.
However, you may still be eligible to file for Chapter 13 bankruptcy.
Chapter 13 bankruptcy is a longer bankruptcy process, in which you pay your creditors back some of what you owe them through a debt repayment plan.
Whether your income and expenses are within Chapter 7 bankruptcy income limits is just one question to consider.
An experienced Arizona bankruptcy lawyer at the Stone Rose Law Firm can help you understand your financial situation, including whether you have alternatives to bankruptcy debt relief.
We can also let you know if Chapter 13 bankruptcy is your better choice.
The bankruptcy attorneys at Stone Rose Law are here to help you with your bankruptcy-related questions and your bankruptcy case filing needs.You can get started by calling us at (480) 739-2448 or filling out our contact form to schedule a free consultation, in which we will walk you through the entire debt relief process.
