In the bankruptcy alphabet, many words do not have their ordinary meanings. It’s like a Twilight Zone of law, and you expect to see Rod Serling puffing on a cigarette off to the corner. Of those twisted terms, few are odder than “household.”
In the old days, you’d look to your own income and expenses when determining whether you could pay your bills. This makes sense, doesn’t it? If you don’t make enough to cover the debts, you might need to file for bankruptcy.
These days, however, we’re tied to the means test – a series of calculations designed to figure out whether you’re eligible to file for Chapter 7 bankruptcy or whether you’ve got no choice but to file for Chapter 13.
The means test is based not on your actual income and expenses, but rather the accepted standard levels based on your household size. The bigger the household, the better your chances of qualifying for Chapter 7 bankruptcy.
This would be confusing even if the bankruptcy laws gave a definition of the term “household.” Unfortunately, such a definition is nowhere to be found.
How Is Your Household Determined?
Only in the world of bankruptcy do we need to have a conversation about the size of a household. In the real world, we tally up the number of people in the house who are related to one another and who depend on one another for financial support.
But remember, here we’ve got a lot at stake. Large number means large median income for means test purposes. Large median income means it’s easier to get into a Chapter 7 bankruptcy.