Do I qualify for a Chapter 7 Bankruptcy?
Understanding Attorneys Helping Clients in the Nampa and Boise Areas File for Chapter 7 Bankruptcy
In some cases a Chapter 7 Bankruptcy is the best option and can wipe out the most debt. However, you must meet certain financial requirements in order to qualify for a Chapter 7 Bankruptcy. You can qualify in two ways. The first, and easiest, way to qualify for a Chapter 7 is to determine if your income is below the State’s median income for a household of your size. If your income is below the State’s median income, then you qualify, and no further analysis is needed. For the State of Idaho the median family income is as follows:
- 1 person – $44,038
- 2 people – $53,077
- 3 people – $59,929
- 4 people – $67,269
- 5 people – $75,669
- 6 people – $84,069
If you have more than 6 people in your household, add $8,400 for each individual. If you are reading this blog outside the State of Idaho, you can determine your state’s median income by clicking on the following link and choosing your state:
It is important to note that the law says “household” and not “family.” In Idaho, the Courts use what is called the “economic unit approach” when determining a person’s household size, and it does not depend solely on whether the individuals within the household are related.
“Put simply, under the economic unit approach, a ‘household’ for means test purposes involves a debtor, and those financially supported by the debtor. Stated yet another way, the correct approach is one that determines household members based upon a person’s financial dependence upon, and residence with, a debtor. As such, the definition of household must be based on the economic reality for a given debtor.”
In re Ford, 509 B.R. 695, 698 (Bankr. D. Idaho 2014) (internal quotations, citations, and brackets omitted).
Therefore, the fact that the people living with you are not related to you does not mean that you cannot include those people in your calculation to determine if you pass the means test to qualify for a Chapter 7 Bankruptcy.
Second, if your current monthly income is above the State’s median income, you may still qualify to file a Chapter 7 Bankruptcy. In order to do so, you must calculate your “disposable income.” Calculating your disposable income is complex and not appropriate for a short Blog post. However, in general, you must calculate your “current monthly income,” which is your income over the last six months, and deduct your “allowed” expenses. If your disposable income is over a certain amount, then you do not qualify for a Chapter 7 Bankruptcy.