November 21, 2017

Median Income & Bankruptcy: Getting Through the Door for a Chapter 7 Bankruptcy

For consumers, there are two main types of bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy.  Chapter 7 bankruptcy is by far the most widely used form of relief in the bankruptcy spectrum.  But there are certain conditions that must be met to qualify for a Chapter 7 bankruptcy.  This post details the most important condition that must be met – the consumer who files bankruptcy must be below median income (in some cases the consumer can be above, but other conditions must be met).

The means test is based on US Census Bureau statistics and updates every 6 months. If you are below median income (theoretically half the people are below this threshold and half the people are above this threshold) then you automatically qualify for a Chapter 7 bankruptcy.  However, if you are above-median income, then you will not automatically qualify for a Chapter 7 bankruptcy (however, if you have certain deductions, such as high medical expenses or secured debt, you may still be able to qualify for a Chapter 7 bankruptcy).

The median income most recently was adjusted in May 2014.  It will adjust again in October.  Currently the median income for household size follows:

  • for a household of 1: a person qualifies  for a Chapter 7 bankruptcy if he or she makes less than $45,435 per year
  • for a household of 2: a person qualifies for a Chapter 7 bankruptcy if he or she makes less than $56,382
  • for a household of 3: a person qualifies for a Chapter 7 bankruptcy if he or she makes less than $61,582
  • for a household of 4: a person qualified for a Chapter 7 bankruptcy if he or she makes less than $71,849
  • For each additional person in the household, the amount increases by $8,100.

Even if you are above median income you may still qualify for a Chapter 7 bankruptcy.  If you do not qualify for a Chapter 7 bankruptcy, then a Chapter 13 bankruptcy is a consideration.

If you are interested in filing a Chapter 7 bankruptcy and want to know more about the means test, please call today for a free in-office bankruptcy consultation.

 

Pursuant to 11 U.S. Code § 528: "I am a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code."

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