When people get into bad financial spots in their lives, bankruptcy is often the best way to handle things. Bankruptcy laws in Chandler AZ are in place to help people get the protection and help they need to get through bad financial situations. If you live in Arizona and are considering a bankruptcy filing, you need to know some facts.

Bankruptcy and Income Levels

Chapter 7 bankruptcy allows people to completely eliminate consumer debt and get a clean financial slate. This type of bankruptcy is not for everyone and there are certain requirements that are in place. A common question that people ask when they are looking into filing for Chapter 7 bankruptcy is, “Do I make too much money for bankruptcy?” With any type of  personal bankruptcy, there are income limitations and requirements that need to be considered.

In recent years a system called a “means test” has been implemented in Chandler, AZ and across the nation. The means test is in place to keep people that have very high income levels from using a Chapter 7 bankruptcy as an easy way to get out of paying for out of control debts. This system is not in place to penalize people who legitimately need to file for bankruptcy. It is in existence simply to stop people who have a high income level, who are perfectly able to repay their debts, from using Chapter 7 bankruptcy as a parachute to get out of their debts.

This is not to imply that you have to be below poverty levels in order to pass the means test. You simply have to know and meet the requirements that are in place. As you begin the process of going through the means test, your average income for the six months prior to your filing will be calculated. Your monthly debts will be subtracted from this calculation. What is left over is considered “disposable income”. Whether or not you are eligible for Chapter 7 bankruptcy will depend upon how high this disposable income level is.

Other Alternatives

If the means test shows that you do make too much money to qualify for a Chapter 7 bankruptcy, this does not mean that you cannot file for bankruptcy. The alternative for most people will be to file for Chapter 13 bankruptcy. This type of bankruptcy allows you to come up with a structured payment plan to repay your debts. As you go through this process some of your debts may be considerably reduced, and some may be eliminated. The debts that will be reduced or eliminated will vary from one case to the next, but a Chapter 13 bankruptcy can still be a valuable tool to help you get off to a fresh financial start.

Both Chapter 7 and Chapter 13 bankruptcies afford people of differing income levels protection from legal action by their creditors. Each plan has its own requirements and limitations, but each can allow people to be protected while they are in the process of repairing their financial problems.