As an Asheville bankruptcy attorney, I sit down with potential clients who give various reasons for why they had waited for a long time before sitting down with me to discuss their financial situation and relief options. One common explanation I’ve heard many times is that “I would have called you last year, and have been struggling ever since, but I read online that I was above the median income and couldn’t qualify for Chapter 7 bankruptcy. I just lost my job so I must qualify now.”
The Relevance of Median Income
The median income for a consumer’s household size determines who must take the means test. If your family is below the median income (Median Income for Bankruptcy Filers), you are not required to fill out the means test at all, and you are allowed to file a Chapter 7 case based on income qualification automatically.
Above Median Income Consumers
Families above the median income for their household size are required to fill out the means test to determine whether they qualify for Chapter 7 relief. In the means test, certain household expenses are deducted from household income to try and determine whether money is available in a family’s budget to pay money to unsecured creditors. If no money is available to pay unsecured creditors in Chapter 13 according the the means test, the consumer is eligible for Chapter 7.
It is quite rare in my bankruptcy practice for me to decline recommending a Chapter 7 liquidation to a consumer because of the means test. Usually, other issues dictate using a different kind of bankruptcy chapter by choice. Its rarely because the means test forbids a Chapter 7. For those that do not pass, a Chapter 13 bankruptcy case can be part of a strategy to protect a family’s assets while reigning in creditor payments at the same time. Chapter 13 is usually a better tool for those kind of wage earners than Chapter 7 anyway.
Many times, of course, I recommend pursuing non-bankruptcy alternatives instead of filing a case.
Become Informed Before Making a Decision on a Relief Strategy
Being above median income usually complicates relief options for a family. A great way to get clarity and figure out those options in and out of bankruptcy is to schedule a free, initial bankruptcy consultation. During those appointments, I can review the details of your situation confidentially, and help plot the best course forward for you and your family.
Photocredit: Skippyhaha Vintage Clothing