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What Requirements Must Be Met To File For A Chapter 7 Bankruptcy?
In Arizona, there are many requirements that must be met in order to qualify for a Chapter 7 bankruptcy. A book could be written on this subject, but here let’s just take a look at a sample of some of the requirements. Keep in mind that your Chapter 7 bankruptcy attorney will carefully analyze your situation to determine whether you are eligible to file a Chapter 7 bankruptcy case. At Thomas Law Office, of often do this at the very first meeting. We provide you with a detailed questionnaire to answer and bring to the appointment. The questionnaire is one of the tools we use to look for potential problems that would occur if you were to file a Chapter 7 bankruptcy case in Arizona.
Either a person or a business can file for Chapter 7 bankruptcy protection in Arizona. Often, however, it may not make sense for a small business to file a Chapter 7 case. Less than half the time, for important reasons, it may make sense for a business owner to bankrupt the small business in a Chapter 7 case, but this is a very complex decision to make and must be made after carefully considering the pros and cons of having the small business entity file for Chapter 7 bankruptcy protection in Arizona. With regard to individuals, in Arizona the person must have been a resident of the state for at least 90 days prior to filing the Chapter 7 bankruptcy.
If the person resided in Arizona for less than two years, the Chapter 7 bankruptcy attorney will need to figure out which state’s exemptions apply or whether the federal exemptions must be used. This is a very important analysis because it could greatly affect the assets you will be able to keep in your Chapter 7 bankruptcy case. You also must generally have insufficient income left over, after paying your regular living expenses and other permitted expenses after the case is filed, to qualify for a Chapter 13 bankruptcy. For example, if after paying your rent, utilities, car payment, insurance, gasoline, food, clothing, medications, student loan installment, etc., you still will have $300 left over, you could get forced into a Chapter 13 case.
This is an important analysis your Chapter 7 bankruptcy attorney will have to undertake, because if you file a Chapter 7 case when you have no basis to do so, you could be accused of abusing the Chapter 7 process, which could have negative consequences for you. Another thing your Chapter 7 bankruptcy attorney will look for is whether you had a prior bankruptcy and if so, whether it was filed too recently for you to be able to qualify for another Chapter 7 bankruptcy case. The time limit between Chapter 7 bankruptcy cases is eight years, measured from the date your first successful Chapter 7 case was filed. If it has been less than eight years since the former case was filed, you may have to wait or file a Chapter 13 bankruptcy instead, although there is also a time limit between a successfully completed Chapter 7 case and a new Chapter 13 case, which is usually four years.
Of course, if you had an actual denial of discharge in a prior Chapter 7 case that you filed, you may never again be able to file a Chapter 7 case with regard to those debts that were denied a discharge. There are a host of other eligibility requirements, but these are some of the more common ones that are seen. But you should never plunge ahead and file a Chapter 7 case without first making sure that you are eligible to file and you won’t lose anything you don’t want to lose if you file the Chapter 7 bankruptcy case.
What Is The Means Test In Arizona?
The Means Test is a calculation that must be performed if your gross income for the six month period preceding the filing of your Chapter 7 case exceeds the median income for that period for a household in Arizona of the same size. For example, if you have a household size of two, and the amount of income you earned during the relevant six-month lookback period exceeds the median income for a two-person household in Arizona, then you will have to take the Means Test. The relevant six-month period is calculated as follows: you count all income (that is, all income that is required to be counted – some types of income are exempt) during the six month period that ended the month before you will file for Chapter 7 bankruptcy protection in Arizona.
An example is the best way to explain how this works. If you plan on filing for Chapter 7 bankruptcy protection in Arizona on September 1st, you would could all income received from March 1st through August 31st. If your income fluctuates, you may simply have to wait or file sooner, depending on the situation – before filing your case so that you will be under the median income for your household size. Even if your income is over the median income for your household size as compared to other Arizona residents, you may still be able to pass the Means Test. When your attorney performs the Means Test, he will deduct various allotted expenses (based on the standards used by the Internal Revenue Service) from your gross income to see if you will have a surplus.
If there’s no surplus, you are eligible to file a Chapter 7 bankruptcy in Arizona if you also meet the other eligibility requirements. If there’s a surplus, do not panic, because in Arizona, unlike in many other states, the inquiry does not end there. The next step your attorney will take is to look at your actual income to expense ratio and see if you have a shortfall each month. If you do, there is a possibility that your attorney can convince the trustee to let you file a Chapter 7. At Thomas Law Office, we have been very successful at finding ways for Arizona clients to legally qualify for Chapter 7 even if their income is over the median for their household size.
The Means Test was first introduced in 2005. Big banks and mega-lenders lobbied hard (and … you know what that means .. our politicians received some nice contributions) to get the Means Test to be a part of the bankruptcy laws in order to reduce the number of people who are eligible for Chapter 7 bankruptcy. We are lucky in Arizona, because in our federal district, the Means Test is not as much of a deterrent as it is in other jurisdictions.
For more information on Requirements For A Chapter 7 Bankruptcy, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling today.