2021 Median Income Limits to Nail Bankruptcy Means Test in Calif

2021 median income limits

Median Income Limits to Nail the Bankruptcy Means Test | New for 2022

The government updated the 2021 median income limits numbers. Using median household income, it again got easier to qualify for bankruptcy Chapter 7, because of another means test adjustment.

The means test for bankruptcy decides who qualifies for Chapter 7 bankruptcy eligibility. The first step of this process is comparing your median household income against the California median income limits set by the Department Of Justice guidelines to see if you earn less than bankruptcy median income limits.

November 2021 Update:  The Department of Justice just announced that it “will not post updated median income totals until a Consumer Price Index adjustment in spring 2022.” Normally it moves the bar that we’re trying to get under twice a year. For the first time in recent memory, there is no Autumn update. This could be good news or bad news, depending on your individual situation.

Because of the above statement, these will be the first 2022 median income limits.

The means test limits adjusts over time.  So, someone may not qualify according to the bankruptcy means test in one month but after the changes they do, or vice-verse. The last updates were in May 2021, and are likely changing again in 2021 (update: not until 2022, see above). Here are the 2021 bankruptcy median income figures to determine who can file Chapter 7 bankruptcy.

Means Test: 2021 Median Income Adjustments

2021 median income limits
2021 median income numbers are much higher than in years past

Every now and then, the government updates the bankruptcy median income limits. They last did it in May 2021. Good news: the California 2021 median income numbers are now even higher, increasing household income for bankruptcy means test qualifying. This means that more people could qualify for Chapter 7 bankruptcy using the California median income numbers below.

2021 Median Income for California Households

Because the California median income changes maybe once or twice a year, these recent changes late last year will be the first numbers used for 2021 median income. You’ll see below there’s talk about household size. Notice also that larger families also get a break, as the amount for each additional member after 4 increases another $9,000. This is helpful for households of five people or more.

What is Median Household Income

When reviewing median household income, we start splitting hairs, since not every home is a traditional household. So, things start getting kind of cloudy on what is or isn’t a household. It isn’t always clear who counts in a household. There may be a difference if you have a roommate who pays rent. What if you’re married? Or have kids but they’re adults. Do you live with your significant other, who has their own finances? Would the answer be different if you had kids together, but weren’t married? Maybe they’d all be considered by the government to be in your household. Or, maybe they’re not. Call and let’s meet to talk about it.

But below are the California median income limits for the various household sizes.

California household size and California median income for Bankruptcy
  • 1-person household: $62,171
  • 2-person household: $82,418
  • 3-person household: $91,605
  • 4-person household: $105,232
  • Each additional person: $9,000

These are the California median income numbers as of early 2021. If it’s later in the year or you’re looking for the median household income for a different state, please review the DOJ link above.

Read Our Means Test Guide.

 

 

Can you file bankruptcy if your household income is over the median?

If you’re over the bankruptcy median, there’s still hope

Yes. The means test and 2021 median income isn’t the “end all be all.” It’s just a starting point. A person can still file Chapter 7 bankruptcy, in some cases, even if they earn more than the median income. The bankruptcy means test would just need to be filled out completely. It’s still possible to qualify.

Over the years, this Los Angeles bankruptcy attorney has helped people who earn over the California median income limits still qualify for Chapter 7. In one case, we even helped a family whose annual income was almost double the median household income. They were earning around $150,000 a year, and we helped them get a Chapter 7 discharge (your mileage may vary). However, even if someone isn’t eligible, there is still a way out of debt in Chapter 13.

Being Under the Bankruptcy Median Income Doesn’t Guarantee Success

On the other hand, just because someone is earning less than the California median income, it’s possible that they’re not eligible for Chapter 7 bankruptcy.  Bankruptcy is all about whether someone can afford to repay their debt or not, and the means test is just one factor.

Note: the median income numbers are not to be confused with the Los Angeles County median home price figures, and each has a different place in evaluating Chapter 7.

Finally, as the economy is always changing, so does California median household income. We don’t know the next time changes to the median income limits will happen again. So, be sure to check before relying on these California median income limits in the future.

Contact Us and Let’s Find out If you Qualify