Category Archives: Median Income

Means Test Median Income Figures Increase For California As Of May 1, 2012

It’s official! The median income has actually gone up here in California. As of May 1, 2012, the median income for a one-person household is $49,188.00, up from $48,814.00. For a comprehensive table reflecting median income figures for all 50 states as of May 1, 2012 visit the U.S. Department of Justice website by clicking here.

Why does this matter? Because median income figures are used to determine a person’s eligibility to file for Chapter 7 Bankruptcy relief, and are also used to determine several other factors including the duration of a Chapter 13 Bankruptcy plan. So, when median income figures rise, it becomes that much easier for people whose income is “on the fence” to qualify for Chapter 7 Bankruptcy relief.

Simply put, if you make too much money you may not be eligible to file for Chapter 7 Bankruptcy. Congress decided in 2005 under the Fair Debt Collection and Consumer Protection Act that people whose income exceeds a certain amount should not be able to discharge their debts in Chapter 7 Bankruptcy and should instead be required to repay all or a portion of their debts in Chapter 13 Bankruptcy.

Eligibility for Chapter 7 Bankruptcy is determined using a “means test”. If a person’s income is below the median income based on their household size, the automatically pass the means test and are eligible to file Chapter 7 Bankruptcy. If their income is above the median income, they have to complete and pass the means test by applying permissible expense deductions to their income, some of which are predetermined and others of which reflect actual living and other expenses. If they pass the means test they can file Chapter 7 Bankruptcy, if they fail the means test then that have to repay some of their debts through a Chapter 13 Bankruptcy repayment plan.

The good news is that incomes are on the rise (at least temporarily) and Chapter 7 Bankruptcy just got that much easier for consumers to file.