The median income standards for determining if you qualify for Chapter 7 bankruptcy will increase on November 1st, 2018. The standard looks at two things, household size and gross income. It is increased periodically to account for inflation and increased cost of living.
The new standards are as follows:
Household of 1 person: $53,803.00
Household of 2 persons: $65,060.00
Household of 3 persons: $80,551.00
Household of 4 persons: $97,692.00
Each additional household member will allow an additional increase in household income of $8,400.00.
A few important things to note. First, household size is determined primarily by whether or not the adults living together are married, and whether or not the children in the household are claimed on the federal income taxes as dependents. So, if a married couple has two kids who are both claimed on their taxes, the household size is four. If a single, divorced person lives with their child part-time, but does not claim the child on their taxes, it is a household of one. There are more complex situations that can be discussed with your bankruptcy attorney, but this is just a broad, brief overview.
A second thing to note is that the household income will look at all types of income for BOTH spouses, whether they are filing for bankruptcy or not. Income includes, but is not limited to, bonuses, unemployment, self-employment, side jobs, Social Security, and pensions. If one spouse has a large income, but no debts, the bankruptcy court will still consider their income in the household total. Income has a broad definition in bankruptcy, if you have any doubt, ask your attorney.
A third important thing to note is these standards refer to gross income, which means your income before taxes. This is very important to keep in mind, as net (after-tax) income can be dramatically different. Many people think of their “income” as the amount of money they take home, but in bankruptcy on the means test, it will refer to your income before taxes.
In any case, your attorney will need to closely review your income to make sure you fall below the median income standard, so always be ready to gather up six months of paystubs. And remember, even if you go above the standard, you may still qualify for a Chapter 13 bankruptcy.
Contact us if you have any questions about whether or not you will be below the median income standard.