The Department of Justice’s United States Trustee Program has updated the median income numbers for bankruptcy, effective November 15, 2013.
Here are the new numbers:
Household size 1: $50,242
Household size 2: $65,701
Household size 3: $71,138
Household size 4: $83,330
Add $8,100 for every household member over the household size of 4.
In bankruptcy, household income and how it relates to the current median income determines whether you can file Chapter 7 bankruptcy to liquidate your debts or whether you’ll have to file Chapter 13 bankruptcy and repay some of your creditors.
It’s important to understand how to calculate your household income. You can’t just look at last year’s tax return. You’ll want to collect paystubs for the last six months (including your spouse’s, even if he isn’t filing bankruptcy with you) and add up all of your before tax earnings. Take that number and divide it by six. That’s your monthly average. Then take your monthly average and multiply it by 12. The result is your annual income. Remember to deduct from your income any social security benefits you or your spouse receive.
Your annual income must be less than the median income to qualify for Chapter 7. If you come up with a number higher than the median income, you’ll have to complete the means test. The means test allows you to deduct certain expenses that may put you below the median income. If you’re under the median income for your household size, then Chapter 7 is your better option, assuming you don’t own any assets that aren’t protected from your creditors.
If you’re wondering if you qualify for Chapter 7 bankruptcy or would have to file Chapter 13 bankruptcy, we hope you’ll come in for a free, no-obligation consultation with an experienced bankruptcy lawyer. You can call 303.331.3403 to set up an appointment or use our online scheduling system.