Bankruptcy Median Income Information

The good, the bad and the misleading.

You’re here because you are interested in bankruptcy median income.

There are many reason to know about the median income if you are contemplating bankruptcy.

But you need to understand . . . there’s a lot more here than meets the eye.

Seemingly simple to apply, it is far from that.

Many attorneys get off track, misunderstand and misapply.

And when this happens, consumers may be given incomplete options.

Or worse, incorrect advice.

Median income is supposed to separate eligibility for chapter 7 from chapter 13.

But it doesn’t always work.

And, it’s just one piece of a much larger picture.

For a complete understanding of how the means test works, and doesn’t work, see the Ultimate Guide to the Means test here on this site.

First, take a look at the chart, and if your median income is under the threshold figure on the chart – for your family size, then you may need to look no further.

But, if you think this means you could, or should, file a chapter 7, you may be very much mistaken.

Median Income Effective November 1, 2020

Family Size Annual  Monthly
1 51,776 4,314
2 66,242 5,520
3 78,059 6,504
4 95,003 7,916

Family Size – some questions you need to explore:

Divorced parents, who claims them on the means test?

Do you support others in your household?

Do you support others not in your household?

Do you claim them on your tax return?

Could you claim them on your tax return?

Do you pay or received child support?

If so, how does that affect the means test?

Is part (or all) of your income social security?

Military benefits

Unemployment benefits

Did you change jobs in the last 6 months?

If so, how did that affect your pay?

Did you receive any bonus income in the last 6 months?

Does this count?

What changes, if any, do you expect in the next 12 months?

Will your family size change in the next year?

Remember, two families with identical incomes could have very different outcomes on the means test.

Owning a home vs. renting can make or break the test.

Cars that are “free and clear” but need to be replaced, could cause you to fail – but if you replaced one or both, you might then pass (and, if you were discharging credit card or medical bills, you might then have more than enough money in your budget to make the monthly payment for the car you need to replace, but cannot pay for now due to debts you need to discharge).

This is just the tip of the iceberg.

As a bankruptcy specialist, I can tell you that the means test is flawed, full of traps for the unwary practitioner, and can be “passed” by making small, legal changes in your overall situation.

And, having calculated thousands of means test cases, and provided hundreds of “second opinion” consultations with clients who first saw other attorneys and sensed that they were not getting all the information they needed, I know that focusing too much on the means test will often lead to the wrong advice.

There’s a lot to know about the means test.

But it’s only part of what you need to consider to get the right solution for your needs.