Chapter 7 and Your Median Family Income

Your median family income must be calculated to determine whether you are eligible for a Chapter 7 bankruptcy filing. It will be measured against the median family income of similarly situated debtors in your state based on the calculations of the Census Bureau and the Internal Revenue Service.

Your Family Income

Your median income for the purposes of a Chapter 7 filing will be calculated based on your income during the six months prior to filing. Determining family income and eligibility for Chapter 7 bankruptcy requires examination of a debtor's financial information, including:

• Wages, salary, tips, bonuses, overtime and commissions;
• Income from a business or career;
• Interest, dividend and royalty payments;
• Rental and other property income;
• Child support and spousal support payments;
• Unemployment compensation, pension and retirement benefits;
• Worker's compensation benefits and disability insurance benefits;
• The number of adults and dependents in your household; and
• Other income sources and financial data.

Your median family income must be calculated and will be measured against the median family income of others in your state who have the same family size as you. If you exceed the median family income for your family size, you may need to consider whether Chapter 13 is more appropriate in your circumstances.

Even if you do pass the median family income means test, a bankruptcy trustee has leverage to determine whether you have adequate income to pay back some or all of your debts. The means test is just there to provide guidance to the court.

Getting Legal Help

A bankruptcy attorney can assist you with figuring out whether or not you are within the means test for filing a Chapter 7 bankruptcy in your state. Because bankruptcy law is complicated and the paperwork must be filed according to legal procedural requirements, getting legal help can expedite your bankruptcy and prevent potential errors.