Criteria for Bankruptcy in Arizona
Bankruptcy is ruled by federal law, but if you live in Arizona you must meet both federal and Arizona requirements to qualify for bankruptcy. If you do not qualify for a Chapter 7 bankruptcy you may have to file Chapter 13 bankruptcy. You may have to sell assets in a Chapter 7 bankruptcy, while in a Chapter 13 bankruptcy you must establish a creditor repayment plan.
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Annual Income Qualification
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Bankruptcy laws changed with the Bankruptcy Abuse Prevention and Customer Protection Act of 2005. Previously, almost any debtor could qualify for bankruptcy. The BAPCPA legislation incorporated a series of qualification tests, the first one being the median income test. In order to qualify for Chapter 7 bankruptcy in Arizona, your annual income must be below the state median for a household that is your size. For example, the median income for a one-person household in Arizona is $41,195, while the two-person median income is $54,510. If your income is above the corresponding limit then you may have to file Chapter 13 bankruptcy, which carries no median income qualification.
Disposable Income Qualification
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If you fail the median income test, you may still qualify for Chapter 7 in Arizona if you have low monthly disposable income. Part of the BAPCPA legislation created the so-called "means test," in which you determine the amount of disposable income you have after you subtract IRS-approved expenses from your total income. You can still file Chapter 7 if your 60-month disposable income is less than $7,025. If it is over $11,725, you must file Chapter 13. If your income falls between these two amounts, you may still be able file Chapter 7. If your 60-month disposable income exceeds 25 percent of your "non-priority unsecured debt" such as credit card debt, you pass the means test and may file Chapter 7 in Arizona.
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Debt Qualification
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You can file for Chapter 7 bankruptcy in Arizona with any amount of debt. If you file Chapter 13, you cannot exceed certain limits for both secured and unsecured debt. Secured debt includes loans such as car loans, where your lender maintains an equity interest in your car until you satisfy your debt. Unsecured debt is any type of general loan without collateral, such as credit card debt. You cannot file Chapter 13 if your secured debt exceeds $1,010,650 or if you have over $336,900 in unsecured debt.
Residency Qualification
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To file using Arizona state laws you must have resided in the state for at least two years before filing. The intent of this law is to prevent debtors from moving to a state with more generous bankruptcy laws and immediately filing bankruptcy.
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