When it comes to qualifying for Chapter 7 bankruptcy, your household size plays a vital role. While determining household size may be straightforward for some, it can be tricky when you live with extended family members, roommates, or other people. In such cases, it is essential to understand how the bankruptcy court defines "household size" for a bankruptcy case.
Knowing your household size is crucial because it is used to calculate your income and expenses, which determine your eligibility for Chapter 7 bankruptcy. Household size includes all individuals who share living expenses with you, such as rent, utilities, and groceries. This includes not only family members but also non-family members who live with you and share expenses.
It is worth noting that the bankruptcy court's definition of household size may differ from your state's definition. Therefore, it is essential to consult with a bankruptcy attorney to determine your household size accurately. Understanding your household size can help you determine whether you qualify for Chapter 7 bankruptcy, which can provide relief from overwhelming debt and a fresh financial start.
How Do You Qualify to File for Bankruptcy Under Chapter 7
If you're struggling to pay your bills and your income is too low, Chapter 7 bankruptcy might be the solution for you. This type of bankruptcy is designed for individuals who don't have enough income to cover their living expenses and debts.
However, there's a catch. In 2005, Congress passed bankruptcy reform laws that introduced the Means Test. This test uses your income from the six months prior to filing for bankruptcy to determine your average monthly income.
Here's the good news: if your income is below the average income for a household of your size in your state, you pass the Means Test. This means that you qualify for a bankruptcy discharge under Chapter 7.
But if your income is too high, you won't be able to discharge your debt in Chapter 7. Instead, you'll need to file for a Chapter 13 repayment plan. Most Chapter 13 cases require a 60-month repayment plan, but some debtors qualify for a 36-month Chapter 13 bankruptcy plan.
It's important to note that your monthly disposable income will also be taken into account. This is the amount of money you have left over each month after paying your living expenses. Your disposable income is the amount you can afford to pay toward your debt. If your disposable income is negative or below a certain amount, you can still qualify for a bankruptcy discharge under Chapter 7.
While Chapter 7 bankruptcy can provide relief for those struggling with debt, it's essential to weigh the benefits and challenges carefully. Consulting with a bankruptcy attorney can help you make an informed decision about whether Chapter 7 bankruptcy is right for you.
Why Is Household Size Important for a Bankruptcy Case?
Did you know that the size of your household can determine whether you qualify for Chapter 7 or Chapter 13 bankruptcy? It's true! The median income for the Means Test is based on household size, meaning that as the number of people in your household increases, so does the income threshold to qualify for Chapter 7.
For example, a family of four can qualify for Chapter 7 with a higher income than a family of two. This is because it costs more to support a larger family, so the income threshold is adjusted accordingly.
It's important to note that when calculating your household income for the Means Test, you must count the income of all members of your household, even if they are not filing for bankruptcy. So if you're filing for Chapter 7 as an individual, you still need to include your spouse's income in the calculations.
Knowing how many people are in your household is a critical factor in determining whether you qualify for Chapter 7 or Chapter 13 bankruptcy. So be sure to take your household size into account when considering your options.
Calculating Your Household Size for a Bankruptcy Filing
It can be difficult to determine household size in bankruptcy cases due to the lack of specific requirements from Congress. The courts make decisions based on individual cases.
Typically, household size is determined by the number of people living in the home. For example, a married couple with two children would have a household size of four. However, if a mother also lives with them, the household size would be five. Bankruptcy jurisdictions often use the “heads in beds” method to calculate household size, meaning that anyone living in the home should be included in the calculation, along with their income for the Means Test.
Things can get complicated when there are roommates contributing to expenses. If a roommate only contributes to expenses, their income may not need to be included in the Means Test. However, the money they contribute may need to be included. Adult children living at home can also pose a challenge. If a child is over 18, has a job, and supports themselves, they may not be counted as part of the household. However, if counting them increases household size and helps qualify for Chapter 7, their income may need to be included.
Another common issue is how to count a child who lives in the home part-time due to joint custody. Whether or not they are counted may depend on who claims the child on their taxes and how child support payments are made.
What Should I Do if I Don’t Know How to Calculate My Household Size for the Means Test?
Not sure about the size of your household? It's always a good idea to seek legal advice. Luckily, many Chapter 7 bankruptcy lawyers offer free consultations.
Contact Us Today for More Information
Are you struggling with debt and don't know where to turn? We're here to help you find an affordable way out of debt.
Our bankruptcy calculators are free and easy to use. They'll help you estimate whether you qualify for Chapter 7 or Chapter 13, so you can make an informed decision about your next steps. Plus, we offer free debt evaluations to help you decide whether bankruptcy, debt management, or debt payoff planning is the best way for you to get out of debt.
Don't let debt control your life any longer. Contact us today to get started. One of our team members will work with you to find a solution that works for your unique situation.