Bankruptcy Income Qualification After a Divorce
A huge factor in many people’s decision on whether to file bankruptcy is if they will qualify for Chapter 7 bankruptcy or need to file Chapter 13 bankruptcy instead. While Chapter 13 bankruptcy provides several benefits, many people prefer Chapter 7 bankruptcy because it wipes away debts rather than reorganizing them into a payment plan. However, Chapter 7 bankruptcy comes with strict income limitations that prevent many married couples from qualifying.
To determine your bankruptcy income qualification, you will need to use your average household income over the past 6 months. Notice that is household income, not just your individual income- if your spouse is employed, their income must be included as well. That means that you may have an easier time qualifying for Chapter 7 bankruptcy after you are divorced, and your spouse’s income is no longer part of your household income. Depending on how close you are to the borderline, you may need to wait a few months after divorce to file bankruptcy to make sure your average household income has decreased.
Chapter 7 Bankruptcy and Divorce
There are two ways to use your income to qualify for a Chapter 7 bankruptcy in Phoenix. The simplest way is by finding your average household monthly income and seeing how it compares to Arizona’s median for your family size. This starts at $4,871.83 per month for an individual, $6,105.17 for a family of 2, $6,592.50 for a family of 3, and continues to increase for additional family members. If you still don’t qualify for Chapter 7 bankruptcy using this method after divorce, you will need to use the means test. This test is complex as it is, and will be even more complex if your expenses have been shifting due to the divorce. We recommend conducting the means test with the guidance of an experienced bankruptcy attorney.