Your ability to file for Chapter 7 bankruptcy involves looking at your household income for the six-month period prior to filing your bankruptcy case, then multiplying that average monthly income by 12. If the resulting number is below the median family income for a household of your size in your state then the presumption is that you qualify for Chapter 7 bankruptcy.
If your household income is above the California Median Income then you’re going to need to go through a longer process to determine whether you can file for Chapter 7 or must instead file for Chapter 13 bankruptcy.
The California Median Income for cases filed after April 1, 2013 is:
- 1 person: $48,415
- 2 people: $63,030
- 3 people: $67,401
- 4 people: $75,656
For each individual in the household in excess of 4, you can add $7,500 to get the California Median Income for the family of that size.
What this means is that if you are a single person or a one person household in the State of California and earn less than $47,433 then you are going to qualify for Chapter 7 bankruptcy. If you earn more than $47,433 then your lawyer is going to have to do a more thorough means testing analysis to determine whether you can qualify to file a Chapter 7 bankruptcy.
Regardless of whether you qualify for Chapter 7 bankruptcy, Chapter 13 may still be a better option even if your household income is above the California Median Income. On the flip side, your income may be significantly above median income and still allow you to go into Chapter 7. The means test isn’t a bright line for qualification, merely a determination of whether you need to do a deeper analysis.
If you have mortgage or car payment obligations, those expenses can be deducted from your means test to bring you close to the Chapter 7 line. So, too, for tax payments. In fact, there are a host of expenses that California residents can use to help them qualify for Chapter 7 bankruptcy. The key is to work with someone like me who knows the ropes and can help navigate the complexities of the means test.
Either way, don’t freak out. We’ll work on it together.