As explained on the Chapter 7 page and Chapter 13 page of my site, most bankruptcy eligibility questions key off how your income compares to the median income levels set by the Justice Department for the state in which you live. The justice department has a new median income update which becomes effective April 1, 2014. The income levels for all family sizes in Minnesota have gone up by at least another $1,000 or so per year. The new median incomes are are follows:
|1 Person||2 People||3 People||4 People||5 People||6 People||7 People|
- Add $8,100 for each individual in excess of 7.
Every case is different, but in most cases if your gross income annualized over the six months before filing comes to less than the median for your household size, you should qualify for a Chapter 7 bankruptcy. If your income is higher than the median, there are other options. One option is to try doing the means test. If you pass, a Chapter 7 might still be possible. If not, your most likely choice would then be to do a Chapter 13 bankruptcy.
Even if you pass the means test, sometimes a Chapter 13 is still a better idea. It seems that once your income is above median, the trustee’s office presumes that you are not entitled to a Chapter 7. You will have to be ready to prove all the information that you put in the means test. You may be asked for several months of bank statements. You may be asked about the income of any children or other individuals in your household. The reasonableness of the expenses you claim may be challenged. By the time the trustee is finished with this process, you may decide to convert your Chapter 7 to a Chapter 13; and if you don’t you may neverthless wish you had started with a 13 in the first place.
While there are mathematical formulas involved, it remains more of an art than a science. The trustee’s office looks at the numbers but also at the totality of the circumstances in deciding how much trouble if any to give you. You need to get a competent lawyer and stay close to that person as you go through the process.
This post is for general information purposes only and does not create an attorney-client relationship. It is not legal advice. I am a debt relief agency, helping people file for relief under the federal bankruptcy code.