Arizona Means Test 2026: Do You Qualify for Chapter 7?

What Is the Means Test?

The means test determines if your income is low enough to file Chapter 7 bankruptcy. It compares your household income to Arizona's median income. If you're below the median, you automatically qualify. If you're above it, a second calculation using allowable deductions determines your eligibility.

The means test was introduced in 2005 to prevent high-income earners from using Chapter 7 to discharge debts they could reasonably repay. In practice, most people who need Chapter 7 pass it.

Disclaimer: This is general information, not legal advice. Income thresholds change every 6 months. Consult a licensed bankruptcy attorney for current figures and case-specific guidance.

2026 Arizona Median Income Thresholds

| Household Size | Annual Income Threshold | |----------------|------------------------| | 1 person | ~$57,000 | | 2 people | ~$70,000 | | 3 people | ~$79,000 | | 4 people | ~$94,000 | | Each additional | Add ~$9,500 |

If your household income is below these numbers, you pass the means test and can file Chapter 7. No further calculations needed.

How Income Is Calculated

The means test uses your average monthly income over the past 6 months (not your current income). This is called Current Monthly Income (CMI). It includes all income received by you and your spouse (even if not filing jointly).

Counted as income:

• Wages, salary, tips, bonuses, commissions
• Self-employment income (gross revenue minus business expenses)
• Rental and investment income
• Pension and retirement income (distributions, not account balances)
• Unemployment benefits
• Child support and alimony received
• Regular contributions from others (e.g., a partner paying bills, parents helping with rent)
• Workers' compensation
• Annuity payments

NOT counted:

• Social Security benefits (this is a major exclusion)
• Payments to victims of war crimes or terrorism
• Temporary Census Bureau income

Why the 6-Month Average Matters

The 6-month lookback can work for or against you:

• Recently lost a job? Your average may be inflated by previous higher income. Waiting 2-3 months lets the higher paychecks fall off the average.
• Recently got a raise? Your average may be lower than your current income, making it a good time to file.
• Seasonal income? Workers with variable income (construction, tourism, freelance) should time their filing to capture lower-earning months.

An experienced attorney can help you identify the optimal filing window based on your income history.

What If You're Above the Median?

Being above the median doesn't automatically disqualify you. Part 2 of the means test allows deductions that reduce your "disposable income." If your disposable income falls below certain thresholds, you still qualify for Chapter 7.

Common deductions:

Housing costs:

• Mortgage or rent payments (actual amount)
• Property taxes
• Homeowner's insurance
• HOA fees
• Home maintenance and repair allowance

Transportation:

• Car payments (actual amount)
• Ownership costs (insurance, registration, maintenance — standardized amounts)
• Operating costs (fuel, parking — standardized amounts based on commute)

Health and insurance:

• Health insurance premiums
• Out-of-pocket medical expenses above $75/month
• Dental and vision insurance
• Disability insurance

Family obligations:

• Child care costs
• Children's education expenses (up to $1,875/year per child for K-12)
• Court-ordered payments (child support, alimony paid)

Taxes and mandatory deductions:

• Income taxes (federal, state, FICA)
• Mandatory payroll deductions
• Past-due priority debts (back taxes, domestic support arrears)

Other:

• Term life insurance
• Telecommunication services (standardized amount)
• Involuntary payroll deductions (union dues, garnishments)

The Disposable Income Threshold

After deductions, if your monthly disposable income is:

• Under ~$160/month → You pass. File Chapter 7.
• $160-$267/month → You may pass, depending on total unsecured debt
• Over ~$267/month → You likely fail and must file Chapter 13

The Math (Simplified)

1. Add up last 6 months of gross income (all sources except Social Security)
2. Divide by 6 = average monthly income (CMI)
3. Multiply by 12 = annualized income
4. Compare to Arizona median for your household size
5. Below median? → You pass. File Chapter 7.
6. Above median? → Complete Part 2 with deductions
7. Calculate monthly disposable income after all deductions
8. Under $160/month? → You pass despite higher income

Example Calculation

Household of 3, income above median:

• Gross monthly income: $7,200 ($86,400/year — above $79,000 threshold)
• Mortgage: -$1,800
• Car payment: -$450
• Health insurance: -$400
• Child care: -$600
• Taxes/FICA: -$1,600
• Other allowed deductions: -$350
• Remaining disposable income: $2,000 - deductions = ~$100/month
• Result: Passes the means test despite income above the median

Special Circumstances

• Primarily business debts: The means test doesn't apply if more than 50% of your debt is business-related (credit lines, commercial leases, equipment financing). Consumer debts like personal credit cards and medical bills don't count as business debt.
• Disabled veterans: Exempt from the means test if disability was incurred during active duty or homeland defense. This is an automatic pass regardless of income.
• National Guard/Reserves: Members called to active duty for 90+ days are exempt during service and for 540 days after.
• Recent job loss: Your 6-month average may be inflated by previous higher income — discuss timing with an attorney to determine the optimal filing date.
• Non-filing spouse income: If you're married but filing alone, your spouse's income is included in the means test but their expenses are deducted. This sometimes creates an advantage for individual filings.

What Happens If You Fail

If you don't pass the means test, you have several options:

1. File Chapter 13 — restructure debts through a 3-5 year repayment plan
2. Wait and refile — if income has dropped, the 6-month lookback may produce a different result in a few months
3. Challenge the presumption — in rare cases, "special circumstances" (serious medical condition, military service, job loss) can overcome a failed means test
4. Negotiate directly — pursue debt settlement or negotiation outside of bankruptcy

Next Steps

Not sure if you qualify? Take our free assessment quiz for an initial evaluation. The quiz estimates your means test result based on household size, income, and major expenses. For a definitive answer, speak with a licensed Arizona bankruptcy attorney who can run the full calculation with your exact figures.