Lower Incomes Make Chapter 7 Bankruptcy Harder to File

A key test to qualify for a Chapter 7 Bankruptcy is the "means test."  Basically, a person or couple who want a Chapter 7 Bankruptcy needs to pass the means test or have income below a certain level to be eligible.  The government sets the means test according to the median income and adjusts it as the economic trends change.

Median Income is Dropping

After March 2010, the median income is changing, for the worse.  With so many people losing their jobs and the current economic climate, the government believes that people make less as a whole.  As such, they have lowered the median income from $48,140.00 to $47,989.00 annually for a single filer.  That is a drop of $151.00 a month.  A couple filing together had their median income dropped from $64,878.00 to $64,647.00 annually.  That is a $231.00 decrease.

Is it That Much Harder to File?

While the amounts are not shocking, it is the trend that raises a flag.  It seems counter intuitive to state that as a whole we are making less so the government will make it harder to get rid of overwhelming debt.  With the less income, we would need more help to get out of debt, not less.

In any case, if you were considering bankruptcy then consider filing sooner rather than later to avoid the decrease in median income.  If you can’t file just yet, all is not lost.  If your income fails the means test then you can still do a Chapter 13 bankruptcy which will still get rid of your debts. Consult a bankruptcy attorney for more information.

Eddy Hsu is an attorney experienced in the areas of Bankruptcy and Family Law.  He is admitted to practice in California and the Northern District of California Bankruptcy Court. He may be reached at 415-230-5388, and via email at eddyhsu@ehsulaw.com. The above article is informational only and not legal advice for your specific situation.  Always consult directly with an attorney to obtain legal advice.