If your family income is more than the “median family income,” you may still be able to file under Chapter 7.
The “median family income” within a particular state is the dollar amount at which half of the families in that state make less, and half make more than that amount. “Median family income” amounts are calculated for different size families within each state. This information, which originates from the U.S. Census, is available on a table downloadable at the U.S. Trustee’s website.
Effective May 1, 2012, the Annual Median Income for the respective California household is:
Household Size: 1 person $49,188 | 2 people: 63481 | 3 $68,135 | 4 people: $77,167 | 5 People
If your income is at or less than the “median family income” for your household size, you are eligible to file under Chapter 7. (Note there are other factors and qualifications requirements in order to obtain a discharge.)
If your income is more than the applicable “median family income,” you still may be able to file a Chapter 7 case however you must pass the Bankruptcy Means Test. Determining whether you are above or below the “median family income” is much harder than you’d think. You take all income earned from all sources from the last six full calendar months then annualize that amount to determine median family income for the year. Note it’s the gross amount of any and all income earned.
If your household income is higher than the applicable “median family income,” then you may still qualify but it’s far more complicated:
1.Determine your “monthly disposable income” by deducting your living expenses from your monthly income. If, after your attorney applies a set of very specialized rules, if the amount left over—the “monthly disposable income”—is no more than $117 (currently), then it is low enough so that you can still file Chapter 7.
2. If after deducting your allowed living expenses, your “monthly disposable income” is more than $195, then you can’t file under Chapter 7, except by showing “special circumstances.”
3. If your “monthly disposable income” is between $117 and $195, then multiply your specific “monthly disposable income” by 60. Compare this amount (X) to the total amount of your unsecured debts. If this amount (X) is not enough to pay at least 25% of those debts, then you can file Chapter 7.
Understanding the Median Income and Means Test is extremely complex and understanding the nuances of both tests can help even high income earners qualify for a Chapter 7 Bankruptcy. Our Riverside Bankruptcy Attorney can help you understand both tests and determine whether you qualify or not. Contact us today to review your financial options from a Riverside Bankruptcy Expert.
