Means Test Update

The means test has been updated for the Western District of Pennsylvania, and has slighly increased.

The means test is a 6 month look-back at ALL sources of GROSS income. Household size is determined by IRS dependents and whether you are a married couple. If you are married and living together, the means test looks at both incomes, even if only one spouse is planning to file. The means test is discussed in more detail in this blog and on this website.

Here are the new means test limits for gross income earned in the six months before filing:

• Household of one: $30,765.00

• Household of two: $37,184.50

• Household of three: $46,706.00

• Household of four: $56,518.50

• Household of five: $61,468.50I

• Household of six: $66,418.50

• Household of seven: $71,368.50

If you have any questions about the means test and whether or not you qualify for Chapter 7 bankruptcy, call us at 412-414-9366. I would be happy to set up a free consultation to discuss your situation. I would be happy to review the means test and see whether or not you qualify.

All Income Counts Towards The Means Test In Bankruptcy

The bankruptcy means test is a six month look-back at all sources of income used to determine whether or not you can file Chapter 7 bankruptcy. I will normally ask potential clients to provide me with paystubs for this period of time. However, the income that is considered for the means test in bankruptcy goes beyond what is in a regular paystub.

For instance, if you receive cash from an employer, or from sales or your own business, without a paystub, it still counts. If you are a 1099 employee who doesn’t receive a paystub, that counts as well. Gig economy income for jobs such as Uber or Doordash, even if very limited and used to pay bills, must be disclosed. Any income from any employer (in any form) will count towards the means test.

Sometimes, late in the filing process, a client will disclose cash income or one of the situations above. The means test will need to be redone to account for this additional income. If you have any doubt, tell your bankruptcy attorney about the income. It will alleviate problems in the future.

Also, non-employment money can sometimes be counted towards the means test. This would include unemployment compensation, child support, and household contributions. While most people would not think of these sources as “income”, they are for purposes of the test..

VA benefits, it should be noted, do NOT count towards the means test.

If you’re considering filing bankruptcy, call us at 412-414-9366. I would be happy to set up a free consultation to see if filing bankruptcy is an option for you.

Some Random Thought on the Bankruptcy Means Test

The bankruptcy means test income thresholds have changed as of April 1, 2022. I discussed this change in my last blog post. Now is a good time to post a few things to remember while dealing with the bankruptcy means test. Just some random thoughts and information…

-Household size is generally determined by your federal income tax dependent claims and your marriage status. If you claim a kid on your taxes, you can likely claim them as a dependent in bankruptcy.

-The means test has a very broad definition of income. It includes things such as bonuses, commissions, gambling winnings, unemployment, second jobs, and the even one time windfalls such as lottery winnings. It does not include Social Security and VA benefits.

-While the means test thresholds are expressed in yearly amounts, it is actually only the six months previous to the month of filing that are considered.

-You may be exempt from the means test if either your debts were accrued while you were on active duty in the military, or your debts are primarily business in nature.

-The means test includes the income of both spouses, even if only one spouse is intending to file. This can be a little confusing for bankruptcy filers, but the fact you must disclose your non-filing spouse’s income will have no impact on them. They are not a part of the bankruptcy filing.

-The means test income threshold‘s are updated every year on April 1st.

-Means test deductions are generally based off of IRS standards, but actual taxes paid and insurance costs can be used.

These are just a few things to keep in mind if you are considering filing bankruptcy and you don’t know whether or not you will pass the means test. If you have any questions about Bankruptcy or the means test, please reach out to us at 412-414-9366. I would be happy to set up a free consultation and discuss your situation!

Updated Means Test Income

The US Census Bureau Family Medium Income chart will be updated once again on April 1st, 2022. This is important because it helps determine whether or not you can file for Chapter 7 Bankruptcy. Incomes above the threshold (annualized on the chart) are not eligible to for a Chapter 7 bankruptcy, but instead must file a five-year Chapter 13 Bankruptcy plan.

The actual look back period is six months, though the chart as provided by the US Census Bureau is in annualized amounts. Therefore, these numbers can be divided by two to give you an idea of whether or not your gross income for the six months before filing is too much to file Chapter 7 Bankruptcy. The new amounts are as followed:

• Household of one: $60,640.00

• Household of two: $74,805.00

• Household of three: $92,441.00

• Household of four: $110,077.00

• Add $9,900.00 for each individual in excess of 4
  

  Call us at 412-414-9366 to set up a free consultation if you want to know whether or not you qualify for the Chapter 7 Bankruptcy. Many issues go into determining whether or not you qualify, but understanding the means test is a good start.

"Income" in Bankruptcy

The definition of income seems simple enough. How much money do you make? But, like most things in bankruptcy law, it is a bit more confusing than that.

First of all, there are two ways of looking at income, gross income and net income. Gross income is the money you earn before taxes, and net income is your earnings after they are removed. Both are important in bankruptcy. Your gross income will be considered in the “means test” (which is discussed in greater detail elsewhere on this blog and website) while your net income will be used in Schedules I & J in the bankruptcy petition.

While gross and net income will generally be proportional in most cases, sometimes they can differ between filers. For instance, net income can be lower if your tax withholdings are particularly high, or if you have large deductions for insurance or retirement accounts. Either way, your bankruptcy attorney will need to discuss both types of income with you in order to determine your eligibility to file bankruptcy.

The definition of income can also be confusing in bankruptcy because the court will consider certain payments to be “income” that go beyond your paycheck. For instance, any type of government benefits will be considered income. This includes Social Security, unemployment compensation, VA benefits, and even food stamps. Adding further confusion, Social Security is considered income for purposes of Schedules I & J of the bankruptcy petition, but NOT for the means test!

The court will also consider other indirect payments as “income”. This includes household contributions towards expenses, side jobs, and even one-time windfalls like lottery winnings! A contribution towards expenses from a roommate is not the traditional ideal of “income”, but in bankruptcy, it is.

This can all be very overwhelming for an individual trying to determine on their own if they qualify. But, I would be happy to discuss your situation and help you determine your bankruptcy “income”. The primary purpose of this blog is let you know you should disclose ANY type of income you may have to your bankruptcy attorney, even if your don’t think of it as “income” per se. As an experienced bankruptcy attorney, I will be happy to walk you through this confusing subject in a free phone consultation. Call me at 412-414-9366.