New Median Incomes for Filing Bankruptcy

A new set of median income levels take effect for consumers filing personal bankruptcy on or after November 1. The median income is used as part of the means test in chapter 7 bankruptcy.

Consumers may be able to file under the previous set of median incomes if the new levels could prevent them from filing chapter 7. The U.S. Trustee Program and Department of Justice allow up to 21 days to file under the old levels.

For more information, compare the new income tables with the previous median incomes at the DOJ web site.

As part of the bankruptcy means test, created as part of the new bankruptcy law of 2005, individuals must compare their income against the median levels for similar family sizes in their state.

For example, the median income for families of 3 in Georgia is $61,104. A debtor whose household earns less than that amount could file chapter 7 bankruptcy to receive a debt discharge. If the debtor’s income is above that amount, the bankruptcy court may allow for some exemptions, or would convert the case to a Chapter 13 bankruptcy.

However, for that same family of 3 in Georgia, the prior median income was $61,959. So a debtor whose income is $61,500, for example, might not qualify to file chapter 7 bankruptcy under the new median income levels (once state exemptions are considered)—especially after the 21-day grace period.

If you are interested in learning more about the 21-day window to file under the prior median income levels or about the chapter 7 means test, contact a local bankruptcy attorney.

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