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median income limits

2023 Median Income Limits to Nail Bankruptcy Means Test in Calif

Median Income Limits to Nail the Bankruptcy Means Test: New for 2023

The government just updated the numbers for 2023 median income limits. Using median household income, it again got easier to qualify for bankruptcy Chapter 7, because of another means test adjustment. And while bankruptcy may seem to be “just forms,” make sure you check out my list of 12 crucial tips to do or avoid before filing bankruptcy.

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.

Again, this comparison against the median income is merely the first step, and does not absolutely determine your eligibility for Chapter 7 or not.

Nov 2022 Update: The numbers for the means test adjusted November 1, 2022, and will be used for the first part of 2023.

Because of the above statement, these will be the first 2023 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 November 2022 . Below are the November 2022 bankruptcy median income figures to determine who can file Chapter 7 bankruptcy.

Means Test: 2023 Median Income Adjustments

2021 median income limits
2023 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 Nov 2022. Good news: the California 2023 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.

2023 Median Income for California Households

Because the California median income changes maybe once or twice a year, these recent changes last 2022 will be the first numbers used for 2023 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 $9,900. This is helpful for households of five people or more.

What is Median Household Income: Roommates and Spouses

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.

Note that if you’re married in California, there’s a community property presumption that your spouse’s income is yours also. So add that, and them, to your household figures. Yes, you can file bankruptcy without your spouse. However, their income, assets, debts, and everything else of theirs still comes into your bankruptcy. Why? California is a community property state. Read more for a deeper dive in my article about spouses and filing bankruptcy.

There may be a difference if you have a roommate who pays rent. What if you’re married? Separated? 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.

You can see this is isn’t as simple as it may at first seem. Contact me and set up a Zoom 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: $69,660
  • 2-person household: $86,271
  • 3-person household: $97,021
  • 4-person household: $113,615
  • Each additional person: $9,900

These are the California median income numbers effective November 1, 2022. If it’s 2023 or you’re looking for the median household income for a different state, please review the DOJ link above.

Read Our Means Test Guide.

California Means Test Calculator for Chapter 7

Many of you have asked about a Means Test Calculator for Chapter 7. So, I put together the following Chapter 7 means test calculator. For other states, there many be others elsewhere on the internet, this won’t apply. This means test calculator for Chapter 7 bankruptcy is just for California.

Also, this is not intended to give advice or definitively say you qualify for Chapter 7 or not. The actual means test is many pages long, and it’s possible to qualify if your income is over the median. Similarly, it’s also possible to be ineligible for Chapter 7 even though your household income is under the median income. Reducing it to one box is like a cheap parlor game, and you should kind of think of this that way.

But notice how, after you input your income, how changing the household size affects the bottom line. As bankruptcy attorneys, this is something we have to be very mindful about and argue for our clients: the appropriate household size based on the unique circumstances of our clients.

With that being said, here’s my very crude 2022-2023 Means Test Calculator for Chapter 7 for California, which you should take with a massive grain of salt:

Wait! 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 2023 median income isn’t the “end all be all.” The above/below median part is 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, debt consolidation is still a solution in Chapter 13 bankruptcy.

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



    California bankruptcy exemptions can save your house.

    New! 2023 California Homestead Exemption Increased by Inflation

    2023 California Homestead Exemption, increased by inflation

    The 2023 California homestead exemption numbers are already available, and different from last year, and even the original range of $300,000 to $600,000. In fact, in 2023, they top out even higher than $600,000, which helps you save more of your home from creditors than the homestead exemption could in 2022. Why? Because of inflation. The new California homestead exemption is tied to the CPI, or consumer price index. And everyone knows things lately aren’t cheap.

    Basics about exemptions

    Chapter 7 bankruptcy is liquidation; the bankruptcy trustee can take your stuff. They don’t take the shirt off your back, but at some point they draw the line regarding what you can keep. These are the bankruptcy exemptions, and each state has its own. The California exemptions include a way to protect home equity.

    There are two sets of California bankruptcy exemptions. California bankruptcy attorneys call these the 703s and 704s. The California homestead exemption is found in the 704s, at California Code of Civil Procedure 704.730. If you choose this way, you lose other things, including the ability to protect a tax refund. Meet with a bankruptcy attorney to find out what’s best for you.

    The Three Homestead Exemptions in California Before 2021

    The California homestead exemption can save your house.
    Talk to a experienced bankruptcy attorney about the California homestead exemption

    In the old days, and by that, I mean prior to 2021, the California homestead exemption was based on the characteristics of the person filing bankruptcy, not the location of the real estate. It was subdivided a few ways. Firstly, there was the bankruptcy exemption that a single homeowner gets. This was in old subsection (a)(1). Most recently, a single person who lived in a house gets to protect $75,000 of home equity under the California exemptions.

    Secondly, there was a higher exemption for a married person’s residence. This was in (a)(2). The California homestead exemption for a married person is $100,000 in the last year of this system.

    Finally, if you can tick one of three boxes, you would get the superduper $175,000 homestead exemption in California’s bankruptcy exemptions. To level-up and qualify for this, you have to either be:

    • 65 years old;
    • have a disability that prevents gainful employment; or,
    • 55 years old, and make below a certain income level that changes from time to time

    This may seem simple, but what exactly is “disabled?” What does “as a result of?” What is the income level, and which time period is measured? Also, a good thing about the $175,000 California homestead exemption is that it would extend to the spouse of the person filing Chapter 7. So if the debtor is, say, 63 years old, but their husband is 67 but really doesn’t want to file bankruptcy, the 63 year old who does file Chapter 7 bankruptcy gets the $175,000 homestead exemption in California anyway.

    In the right circumstances, someone filing consumer bankruptcy can protect a lot more house equity under this third option, which is less than the minimum after the law changed in 2021.

    The new California Homestead Exemption starting in 2021

    Then, in 2021, the California homestead exemption increased dramatically. This provided tremendous relief to California homeowners. What this means to the person contemplating filing bankruptcy is that more of their home equity can be protected. Why? Because they really do take houses in Chapter 7 bankruptcy.

    Previously, the amount of home equity which could be protected was inadequate and hardly kept up with the inflated Calif real estate. But then in 2020, COVID-19 struck, and people were suddenly unable to pay their rent and mortgages. Partially in response to the pandemic, the state legislature passed and the governor signed a dramatic increase to the California homestead exemption.

    The result is a system which depends upon the location where the house is, and has nothing to do with marital status or age. And this makes sense, as a homeowner in Ventura County probably has a higher home value than someone who owns a home in Lancaster CA. It’s now tied to the median home price for the previous year.

    So, starting in 2021, homeowners who’ve lived at a home for 4 years or more get a minimum of $300,000 of home equity protection, and a maximum of $600,000 of California homestead exemption, based on what is, or was, mysterious data. What exactly is the county median home price? In Los Angeles and Orange County, a consensus slowly formed about the amount of the Los Angeles County median home price. And it changes each year (more on that below).

    But be warned: if you haven’t lived there that long (and there are other factors which could jeopardize the new massive California homestead exemption), you don’t even get the $300,000 minimum.

    Los Angeles County median home price 2023 and Exemption Inflation Calculator

    You will want to consult with a qualified bankruptcy attorney before you risk losing your house.

    2023 California Homestead Exemption: Updated numbers

    The 2023 homestead exemption amount adjusts starting on January 1, 2023. Due to today’s historic inflation, the California homestead exemption in 2023 will be higher than in 2022, which was higher than the the initial range of $300,000 to $600,000.

    Why? CCP 704.730 (b) says: “The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.” So let’s walk through the progression.

    In 2021, the top limit for the California homestead was $600,000. Then, in June 2021, the CPI was 297.447, a 4.4% increase from the June the previous year. Applying that factor to the homestead amounts, that would increase both ends of the spectrum to $313,200 and $626,400. As inflation in 2022 is higher yet again, 2023 California homestead exemption will be even more than that.

    Now, in 2023, we do the same thing all over again. With such high inflation recently at 8.27%, the 2023 California homestead exemption will be a little over $675,000. To be more precise, the 2023 inflation-adjusted range of the California homestead exemption is $339,189 and $678,378. To see how these numbers are reached, check out our own custom calculator for county median home price to reach the homestead exemption after adjusting for inflation. This will be helpful for the many counties whose median home price is between these two numbers.

    2023 California homestead exemption chart los-angeles-bankruptcy-net
    2023 California homestead exemption chart

    Fun fact: Do you have to actually live at the home to get the exemption? For how long? Find out more here.

    Be careful in Chapter 7 bankruptcy. It’s not always the best type of bankruptcies.

    Read my 12 crucial tips before filing bankruptcy.

    Don’t go it alone

    You really should consult to a qualified Los Angeles bankruptcy lawyer, as you get what you pay for, and it’s not worth risking your home. If you don’t do this right, you’re literally gambling with your house.

    Schedule a Zoom consult with me, and let’s talk.

    Figuring the Los Angeles Country median home price size is like trying to calculate the median coin weight when all we have is data about stack size

    How to Figure the Los Angeles County Median Home Price (2023)

    How to Figure the Los Angeles County Median Home Price (2023)

    The Los Angeles County median home price in 2022 and 2023 can be tricky to determine. There are different sources that say different things. It’s not clear which of the many options will be relied upon by courts and trustees for the California homestead exemption. Also, while bankruptcy may seem to be “just forms,” make sure you check out my list of 12 crucial tips to do or avoid before filing bankruptcy.

    2022-2023 update: there seems to be a consensus among local bankruptcy attorneys as to what the Los Angeles County median home price is. More than that, this L.A. median price changes each year. While it’s still untested in court, a lot of the initial uncertainty has cleared up. Read on!

    Warning: This is provided as information only, and is not legal advice. If you are thinking of filing bankruptcy, do not rely upon any information on this webpage. You are assuming all risk and are literally gambling with your home. You will have only yourself to blame if you use the wrong numbers for the Los Angeles County median home value.

    See a bankruptcy attorney for more updated information before you file, because there are ways you can lose the exemption.

    Average is not Median

    los angeles county median home value
    The Los Angeles County median home value is not the mean

    Before we can determine what the Los Angeles County median home price is, we’ll need to know what it’s not. A median is not the same as the average. This takes us back to high school math, but a quick couple of definitions:

    • Average (or mean): this is where you add up the data, and then divide by the number of data points
    • Median: this is where you list all the data, and then take the number which is at the midpoint

    So, as you can see, the median is not the same as the L.A. County average home value.

    The Median Changes Over Time

    Because the median is the midpoint of all the data, each time there’s another home sale, the median changes and moves. You may figure with a random distribution of data, there would be an equal likelihood that future sales will be about half above and half below the median, keeping the median the same. But home prices change over time and are not static, and particularly during a virus pandemic like the COVID-19 coronavirus we had in 2020 and 2021.

    For example, you might find some data sources that list the median home prices for last year, but only through December. Can you assume that houses would sell for the same prices in December around the holidays as they do during the summer when people move a lot and kids are usually out of school?

    Read Our Means Test Guide on Median Income Limits.

    The Los Angeles County median home price is not the same as that for the L.A. area

    Los Angeles County is one of the largest counties in the United States, with over 4,000 square miles. While you may find data for the metropolitan area, that’s very different than the numbers for Los Angeles County. Why? Because L.A County goes from South Bay all the way up to the Antelope Valley and Lancaster. The Los Angeles County median home price is pulling together data from all these.

    Los Angeles County is home to about 10,000,000 people, while the city of L.A. has “only” 4,000,000. If you use only city data, you’re missing out on home values in remote areas in LA County like Littlerock and Pearblossom on the 138 and on the way to Vegas.

    The Median Home Value is not the same as Median Home Sales Price

    You can find some sites which average the values of the homes in the L.A. area, or even Los Angeles County. The problem with that is this: you’re using their own estimate about the Los Angeles county median home values, even those that didn’t sell, when what you’re really needing is the sales price of homes that actually sold.

    After reviewing all the above, you can see that we’re looking for a very specific thing here, and no one website reports the Los Angeles County median home price, or has information that in 2022 is depended upon reliably as the “go to” source for Los Angeles County median home value information. Over time, maybe one place will emerge, but for now there’s just a few “almost there” entries.

    Some Data Sources Which are Close

    which data source can provide the los angeles county median home price
    Which of the various data sources is the right one?

    With all that being said, you can understand the challenge of finding the Los Angeles County median home price. Most websites are using averages, some have only the L.A. area, and none of them let you have access to the data of all the home sales so you can calculate the median yourself.

    Zillow: this company is famous for using its proprietary “Zestimate” to approximate home values. For example, if you go here, you can find what Zillow calls “the typical home value of homes in Los Angeles.”

    But that number isn’t clear…. What does “typical” mean – average or median? Remember, they’re different. Home value or home price? There’s no indication this is relying on sales data. And for what time period? Now, at this snapshot in time, last month, this year, or last year?

    The website doesn’t say what the Los Angeles County median home price is. It also doesn’t say if it includes single-family homes, is only single-family homes, or something else.

    Realtor: This website features real estate, but if you dig down deep enough, you can find market data, research, and trends. It provides data by month, not year, and appears to be providing listing prices, not sales prices.

    Redfin: Redfin is another national real estate website, which tracks listings and sales, and helps connect home buyers to realtors. It has market dataand trends, but seems to be restricted to only Los Angeles city, not all of Los Angeles county median home price info.

    CAR: The California Association of Realtors also has some market data. But it cautions that the data which it is using comes from over 90 associations and counts “single family detached homes only” and “median price changes may exhibit unusual fluctuation.”

    Trulia: Similarly, Trulia is a real estate website that tracks home sales and house prices. It has a way to filter for L.A. and show market information at the bottom of the page, but doesn’t show Los Angeles county median home price or value info. It appears to list home values the way Zillow does, but it doesn’t appear to be relying on sales data.

    News reports: You may find news reports from Los Angeles-based newspapers that report data on home sales prices.

    how to calculate the inflation-adjusted county median home price
    When calculating the inflation-adjusted county median home price, the median coin isn’t the median stack.

    Note: you may find some websites that provide spreadsheets of Los Angeles County median home price data, and lists medians by month. Taking the median of the medians isn’t the same as the median of all the sales data. It’s just creating garbage data. To find the true Los Angeles County median, you’d have to have access to all the sales data. This is something very few people have.

    And that’s the problem: no one person has the data, and different places which are close report different numbers for the Los Angeles county median home value.

    While some of these are close, none of these seem to provide “the” number. Not one can be relied upon, especially for something which involves risking your home.

    Summing up the initial Los Angeles County median home price

    Is there one bottom line source? Not yet, not until it’s litigated, and honestly, a lot of us in 2021 are trying to sift through all this information to make sense of it. Maybe in the months ahead, one choice will crystalize as the one we all rely upon.

    This will likely be after litigation and people guess wrong. Sadly, they will lose their homes in some cases because they guessed wrong on home value. Currently, there is not one number that we can reliably “bet the house” is the median home price in Los Angeles County.

    2022-2023 update: with all that said, it is generally agreed upon that the 2021 and initial Los Angeles County median home price is $600,000, adjusted for inflation.

    But wait, there’s more!

    California homestead exemption, county median price adjusted for inflation

    Recall that the California homestead exemption is the county median price adjusted for inflation. So, each year, each county’s exemption amount is different. Section (b) of the new California homestead says:

    The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022, based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year, published by the Department of Industrial Relations.

    We don’t know exactly where the county median number comes from, (though the Central District of Calif court seems to endorse CAR but that may or may not be valid evidence in a trustee challenge). Further, the inflation percentage is a different number whose source is similarly mysterious.

    Here is how the inflation adjustment of section (b) would work.

    The California fiscal year ends in June. Therefore, we take the difference between the old June CPI number and compare it to the most recent new June CPI number. What is that percentage?

    CPI and inflation-adjusted California homestead exemption
    CPI and inflation-adjusted figures to use in calculating the California homestead exemption, chart from ca.gov showing increases from June 2020 to June 2022

    For 2022, the difference between the June 2022 number (297.447) and the June 2021 number (284.835) represents a 4.43% increase. Therefore, for counties capped by statute at the $600,000 maximum, the maximum 2022 median home price and homestead exemption would be $626,566.96. This number will change again in 2023, and “will adjust annually, beginning on January 1, 2022.”

    I made a calculator so you can figure out this year’s California homestead exemption amount for any county in California (assuming you have the median sale price number), adjusted for inflation. Better yet, we can calculate next year’s inflation-adjusted homestead exemption if we have June’s CPI numbers already. So bookmark this page and return every few months or so.

    Remember, these Calif CPI figures — and the resulting percentage increase — also impact the inflation-adjusted homestead exemption in counties where the minimum was $300,000, or counties in between that and the max, like Riverside and San Bernardino County.

    Be cautious, use this information at your own risk, as you’re literally gambling with your (or your client’s) house. Thanks for reading.

    Contact us

    If you’re in Los Angeles County, contact us to request a case evaluation, or go ahead and schedule it for free right now.

    chapter 13 debt limits

    Chapter 13 Debt Limits (2023 update)

    Chapter 13 Debt Limits (2023 update)

    Debt Limits in Chapter 13 Bankruptcy

    2023 Update: Chapter 13 debt limits in 2023 just got a huge increase last June. There is a new law changes which, among other things, increases the Chapter 13 debt limit to $2.75 million dollars. This limit is for both secured and unsecured debt combined. It’s about double what the debt limits had been, and is extremely helpful for Los Angeles residents who have a second property and mortgage debt that exceeds $1.5 million. The 2023 Chapter 13 debt limit increase is temporary and will sunset in 2024, unless extended.

    March 2022: The Senate has introduced a bipartisan bill which would increase the Chapter 13 debt limits significantly if it passes. S3823, the Bankruptcy Threshold Adjustment and Technical Corrections Act (BTATCA) would almost double the amount of debt you can have in Chapter 13.

    Chapter 13 debt limits limits who can seek relief in Chapter 13 bankruptcy. These eligibility figures are set by law and are adjusted regularly, and restrict which cases can be in Chapter 13 bankruptcy. As you might know, Chapter 13 bankruptcy involves repaying some or all of your debt. People will sometimes ask, “do I qualify for chapter 13?” The answer, like to many legal questions is, “it depends.”

    The purpose is so that the Chapter 13 trustee doesn’t administer cases that are too large and burdensome. At some point, the line is drawn, and let’s face it, in Southern California where this Los Angeles bankruptcy attorney practices, the secured Chapter 13 debt limit is inadequate. If someone has a rental property, they’re probably over the line and don’t qualify, which is hardly fair.

    To qualify for Chapter 13 bankruptcy, the reorganization bankruptcy, a few things have to be looked at. First, a good Los Angeles bankruptcy attorney will examine your cash flow. That is, can you afford to repay your debts? Or are you struggling to keep your lights on?

    Unsecured and Secured: the Chapter 13 Debt Limits

    Second, you have to compare your debts against the debt limits. These numbers constantly change. And to be honest, we bankruptcy lawyers have to look them up, since in most cases they’re not a factor. And just when we learn them, they change again.

    2023 Updated Chapter 13 Bankruptcy Debt Limits

    Note: the following is superseded by temporary changes in the law effective June 2022 described at the top of this page.

    So, as of April 1, 2022, the Chapter 13 debt limits are

    • Unsecured debt: $465,275 (up from $419,275)
    • Secured debt: $1,395,875 (up from 1,257,850)

    These values are effective 4/1/2022, and seem to be still be the most current. Normally, you’d check a government website for updated values. However, as of this writing, even the courts are still listing the chapter 13 debt limits that are from before 2019. Other sites, though, seem to be more current.

    Some Blurred Line Debt Limit Examples

    Even this is oversimplifying things, because where do lawsuits against you fall? That is, if someone has taken you to court, is it a secured debt or an unsecured one? What if you think you’ll win: does it count as a debt at all?

    Another issue arises with student loans, particularly if you cosigned as a parent plus loan and it’s not really your debt. Or is it?

    Further, tax debt is another tricky one. Is it unsecured, secured or both? And what if it’s priority, can it also count against the unsecured debt? What if you dispute it?

    There are a lot more issues that can arise, so you’ll want to consult with a skilled Los Angeles bankruptcy attorney who specializes in Chapter 13 bankruptcy. I’d be honored to work with you.

    Contact us for a consultation

    If you’re in the Los Angeles County area, contact us and let’s arrange for a no-obligation Zoom consultation to see how bankruptcy would help you, and to determine your Chapter 13 eligibility.


      types of bankruptcies chapter 7 vs 11 vs chapter 13

      3 Types of Bankruptcy (2023 update)

      Types of Bankruptcies: Chapter 7 vs 11 vs 13

      There’s a lot of confusion about the types of bankruptcies. Firstly, some clarification on jargon. You’ll hear a lot about bankruptcy chapters. What’s a chapter? Think of it as a bankruptcy type, or a kind, or flavor. While there at least five types of bankruptcies, most people thinking about consumer personal bankruptcy will focus on just two or three bankruptcy types, or chapters, including Chapter 7 vs 11 vs 13.

      The type name “chapter” just refers to the part of the Bankruptcy Code, which is Title 11 of the United States Code. For example, much of the bankruptcy laws that cover Chapter 7 bankruptcy starts at 11 U.S.C. 701, and following. The book I have on my desk literally has a section called Chapter 7 – Liquidation.

      Listing the Types of Bankruptcies

      Ok, so now that we have some basics out of the way, let’s take a look at the different bankruptcy types commonly used when people file bankruptcy.

      • Chapter 7 bankruptcy: the most common bankruptcy type, used by people who don’t earn much income.
      • Chapter 9 bankruptcy: for cities and municipalities.
      • Chapter 11 bankruptcy: reorganization, typically of a large business
      • Chapter 12 bankruptcy: for farmers and fishermen. Not used very much by Los Angeles bankruptcy debtors.
      • Chapter 13 bankruptcy: repaying all or some debt with regular payments
      • Chapter 15 bankruptcy: cases that cross borders, like international law

      So many choices! Strangely, almost no matter what you select will be an odd choice. Where does someone even start with such a list when want to file bankruptcy? We can narrow the list down a bit.

      Choosing a Bankruptcy Type or Chapter

      In narrowing the list down, we notice that there are really two big classes of chapter: it’s either for an individual (consumer bankruptcy), or for a larger entity (government or business bankruptcy)

      Personal bankruptcy vs business bankruptcy

      The personal consumer bankruptcies are Chapter 7 and Chapter 13. These are the bankruptcy types done by most people who declare bankruptcy. They’re personal bankruptcy or consumer bankruptcy. Why? Because the individuals, the people, filing them, are consumers who are trying to get rid of (discharge) consumer debt, like credit cards, car repos, etc.

      Getting down to business

      In contrast, the business bankruptcies are Chapter 9 (city government), Chapter 11 bankruptcy (think of General Motors), Chapter 12 (fish or farms), or Chapter 15 (foreign).

      What about a mom-and-pop business? Is that a personal bankruptcy since it’s “personal?” Is it a consumer bankruptcy because the people who own the business are consumers who decided to take a risk and start a business? It feels like a business bankruptcy. Or is it closer to a Chapter 11 reorganization like GM? There’s no hard-and-fast rule, but more often than not, a small business has debt guaranteed by the business owner, and can be a consumer bankruptcy. But you’ll want to contact to a Los Angeles bankruptcy attorney about that.

      2023 Stats: Bankruptcy Filings for Los Angeles

      2022 Los Angeles Bankruptcy Filings (last complete year)
      • Chapter 7
      • Chapter 11
      • Chapter 12
      • Chapter 13

      Types of Personal bankruptcies (Consumer Bankruptcy)

      Look at the chart above. if you’re like most people, you’re not a farm or fisherman, so chances are you’ll want a consumer bankruptcy (you can’t even see the Chapter 12 slice: most years in our district the number is single digits). So, this really narrows things down for most individuals to Chapter 7 bankruptcy and Chapter 13.

      Chapter 7 is where you can’t afford to pay on your debts. Therefore, you don’t have to. Alternatively, Chapter 13 bankruptcy is where you can afford to make debt repayment.

      And just for fun, some moreCentral District of California bankruptcy statistics about bankruptcy filings over time. This time, we’re just focusing on newly opened Chapter 7 bankruptcy cases in the Los Angeles area.

      Central District of California Bankruptcy Filings

      • Chapter 7
      • Chapter 13
      • Chapter 11

      (Credits: filing statistics courtesy of Kathleen J Campbell, Clerk of Court; graphed by Los Angeles bankruptcy attorney Hale Antico)

      A few points:

      Chapter 7 filings are always more than Chapter 13 and Chapter 11 and Chapter 12 combined. This doesn’t mean Chapter 7 bankruptcy is better; it’s merely what more people are doing based upon the advice of the person to whom they’re consulting.

      BAPCPA

      Next, Chapter 7 bankruptcy cases spiked in 2005. This was largely due to over-hyped fear that Chapter 7 was going away with the new means test for Chapter 7.

      Further, in 2006, all filings went down. This is because anyone thinking about filing bankruptcy did it in 2005 before it was “too late.”

      Additionally, after 2007 the Chapter 7 filings were up higher than the 2005 reform. All chapters did. That may partially be due to BAPCPA and the bankruptcy means test. It’s also due to breaking of the Great Recesssion.

      Boom and bust

      After 2008, Chapter 13 filings really took off. This was largely because of people filing to stop foreclosure and save their home. Sure, there were probably some just paying the smaller filing fee with no intent on following through. Mostly, people were trying to use Chapter 13 to pay back the mortgage lates. This cycle peaked in 2010 with filings 3 to 4 times higher than what they were in 2017.

      Finally, the mortgage market stabilized and the economy improved over the next few years. Consequently, bankruptcy filings went down for the next half-dozen years. The last few years leading up to 2019, Chapter 7 filings started trending up slightly.

      In 2020, California median incomes are breaking milestones, which seems counterintuitive, since the COVID-19 pandemic hit and caused unemployment to spike up to double-digits for a time. Yet despite the virus pandemic and its hit on the economy, the Los Angeles County median home price remained high.

      But what about Coronavirus and bankruptcy? You’ll see that 2020 bankruptcy filings were down across the country because of COVID, and in some chapters in the chart above, down by over 50% with Los Angeles bankruptcy filings compared to the year before. In 2021, Chapter 13 cases were down sharply from 2020, and that was the year we were under lockdown, moratoriums were put in place, stimulus and unemployment money flowed, and we couldn’t get to the court.

      October 2022 saw about 20% fewer Chapter 7 filings in the Central Dist than were filed in October 2021. In fact, Oct 2022 marked the tenth straight month that Chapter 7 filings in the CDCA were lower than the same month the prior year. Year-over-year, each month has measured a decrease of at least 20% for Chapter 7 filings (most months over 30% lower), for all of 2022.

      On the other hand, also through 10/2022, Chapter 13 filings have been higher each month this year in our district compared to the same month last year with the exception of February.

      For the year of 2022 , there were 17,290 Los Angeles bankruptcy new filings of all chapters in the Central District of California. we were down about 25% of filings of all chapters compared to the 2021 total of 23,128, already a depressed year for filings (though, oddly, Chapter 13 filings were up last year). For context, 2019 (the last pre-pandemic year) saw approximately 38,168 filings. This puts 2022 filings down about 55% from before the pandemic hit. And 2019 was already slow. So unless something changes with inflation, gas prices, or recession, 2023 may be another one of the slowest years of bankruptcy filings in recent memory.

      Chapter 7 vs Chapter 13

      For most people, it comes down to whether to file Chapter 7 bankruptcy vs Chapter 13 bankruptcy. Each side has advantages and disadvantages, and every situation is different.

      Key Advantages of Chapter 7 bankruptcy compared to Chapter 13

      Chapter 7 bankruptcy has a lot going for it. Focusing only on the major benefits of Chapter 7 vs 13 types of bankruptcies:

      • No debt repayment (usually)
      • Over in less than 6 months (usually)
      • Many people keep all their stuff
      • Usually less expensive attorney fee
      • Only one court hearing (usually)

      Key Advantages of Chapter 13 bankruptcy compared to Chapter 7

      Chapter 13 bankruptcy is not without its own benefits over Chapter 7. Here’s a look at where it shines:

      • No trustee takes your assets. You keep all your stuff.
      • Transfers and other interesting things you did before filing bankruptcy not an issue
      • Can file bankruptcy again sooner
      • Lets you catch up on mortgage lates and save your home.
      • Feel good about paying back your debt on your own terms.
      • It’s an open door if ineligible for Chapter 7 due to Means Test
      • Automatic Stay bankruptcy protection extends to your spouse and co-signers
      • Not forced to sign a Reaffirmation Agreement to be potentially stuck with debt after bankruptcy

      Read our Ultimate Chapter 7 Bankruptcy Guide

      Is it better to file a Chapter 7 or Chapter 13

      The choice in types of bankruptcies leads many people to ask, “Is Chapter 7 better than Chapter 13?” There really is no way to say if it’s better to file Chapter 7 or Chapter 13, as each situation is different. Every client is unique, with priorities and circumstances unlike anyone else’s.

      But it seems Chapter 7 Bankruptcy better than Chapter 13

      It seems that Chapter 7 is the best of the types of bankruptcies, but again, everyone’s situation is different. How about some examples. Firstly, consider the person who doesn’t make much money, and qualifies for Chapter 7. However, maybe he has a two paid-off cars and some home equity. Or a lot of home equity. Or has filed bankruptcy before. This is not an ideal Chapter 7 bankruptcy.

      Secondly, what about the person who transferred some assets in the past four years? Or took out $150,000 from their IRA and spent it all two years ago. They qualify for Chapter 7, but is it wise to file bankruptcy under that chapter? It may make more sense to file Chapter 13 bankruptcy.

      Too much credit after bankruptcy

      Thirdly, another example. More than a couple of times I’ve met someone who filed bankruptcy, got credit after bankruptcy, then got more debt before a job layoff and they can’t pay and they’re being sued, or suffering a wage garnishment. They need another bankruptcy, but enough time hasn’t passed. Chapter 7 bankruptcy just won’t work here.

      These are three examples where someone will want to file Chapter 13 bankruptcy instead of Chapter 7, and we didn’t even talk about people disqualified from Chapter 7 by the means test.

      I was told I should choose Chapter 7 Over Chapter 13

      As you see, of the types of bankruptcies, Chapter 7 isn’t always better than Chapter 13 bankruptcy. However, some bankruptcy attorneys really only do Chapter 7 bankruptcy cases. These bankruptcy lawyers never really took the time to learn the intricacies of Chapter 13, and as a result, they shy away from them. When all you have is a hammer, everything looks like a nail. And when a bankruptcy attorney only does Chapter 7 cases, everything looks like a Chap 7.

      Why wouldn’t bankruptcy lawyers do Chapter 13 cases?

      When weighing Chapter 7 bankruptcy vs Chapter 13 bankruptcy, some bankruptcy attorneys don’t even compare; they just do Chapter 7s. Why wouldn’t a bankruptcy lawyer do all types of bankruptcies?

      Firstly, Chapter 13 bankruptcy cases take longer. It involves a commitment of between 36 and 60 months. Not all bankruptcy lawyers want to be on the hook for everything that happens over the next 5 years. They want to get the money and run. Heck, I know of a Chapter 13 bankruptcy attorney who gets the fee, then disappears after the first three months. They then hand their clients off to another bankruptcy lawyer to deal with all the things that might arise the next 57 months. The person they bonded with at the consultation bails. Los Angeles bankruptcy lawyer Hale Antico sees all his Chapter 13 bankruptcies through to the end.

      Some bankruptcy attorneys never learned Chapter 13 bankruptcy

      types of bankruptcies chapter 7 vs 11 vs chapter 13
      Types of bankruptcies: Chapter 7 vs 13 vs Chapter 11

      Secondly, Chapter 13 bankruptcy cases have a much lower success rate than Chapter 7 bankruptcy. Nationally, about one of three cases have their payment plan finish. Judge Wayne Johnson of the Central District of California (where Los Angeles bankruptcy cases are filed), estimates only 3% of CDCA Chap 13 cases succeed, and approaches 0% where the person files without an attorney.

      However, Los Angeles bankruptcy attorney Hale Antico has a Chapter 13 success rate higher than 0%, higher than 3% (the district average) and about double the national average. Over 70% of this bankruptcy lawyer’s cases succeed to the end. Partially, this is due to understanding all the twists and turns of Chapter 13 bankruptcy. Also, it’s because we prepare our clients, so there aren’t surprises. We have more than one tool in our belt, and not every case is a nail. We’ve successfully completed hundreds of Chapter 13 bankruptcy cases in an district where bankruptcy attorneys have a rate of success at just 3%.

      Finally, because we succeed in Chapter 7 cases and Chapter 13 cases, we won’t steer you away from the scary thing we never learned. I’m pretty darn good at both, and so I’ll can give you an honest opinion if Chapter 13 is better than Chapter 7 for your situation. Because in many situations, when weighing Chapter 7 vs 13 in the types of bankruptcies, Chapter 7 is not always better than Chapter 13.

      Chapter 7 vs 11

      Looking at types of bankruptcies, many people want to compare Chapter 7 vs 11 for individuals. This doesn’t always make sense. When given the option between Chapter 7 vs 11 personal it’s like asking what’s better: apples or Thursday. Chapter 7 bankruptcy is for people who can’t afford their debts. Chapter 11 bankruptcy is typically for large businesses, and corporations. Yes, these corporations can be owned and controlled by an individual, so they may be curious about Chapter 7 vs Chapter 11 for individuals. However, the circumstances where that would make sense are few and far between. (disclaimer: Chapter 11 bankruptcy lawyers are a niche in the bankruptcy attorney field, and this one doesn’t do them).

      You Keep Using that Word

      One reason people compare Chapter 7 vs 11 is because of confusion. 7 and 11 go together on the craps table and convenience stores, so people naturally assume they’re a pairing in bankruptcy. As I wrote above, Chapter 7 and 13 are the real pairing. Most individuals don’t choose Chapter 11. There would have to be a good specific reason. When they say Chapter 11, many people really mean Chapter 13.

      Another reason people automatically don’t really mean Chapter 11 when they’re thinking of Chapter 11 is the cost. I don’t know of too many bankruptcy lawyers who will start a Chapter 11 with anything less than a $10,000 retainer, all up front, just to get started. Few people can do that. A larger business might have the resources to do that, or an individual with a more complicated family corporation.

      Individual Chapter 11 Does Fit Sometimes

      Chapter 11 bankruptcy does provide some additional flexibility over a Chapter 13, and this can be more appealing to the person thinking about a personal Chapter 11. You’ll want to consult with a Chapter 11 bankruptcy lawyer. Additionally, some individuals don’t qualify for Chapter 13 bankruptcy because of the debt limits. This can come up more in Southern California where someone owning a rental property or two can have secured debt exceeding $1.5 million and can’t do Chapter 13, won’t want to do Chapter 7 because of liquidation, and would need to give a hard look at a Chapter 11 bankruptcy for individuals.

      Finally, experience dictates that people who ask me about Chapter 11 really mean Chapter 13. We do both Chapter 7 vs Chapter 13, and are upfront that we don’t do Chapter 11 bankruptcies, but know a few good attorneys in the Los Angeles area that do. If interested, drop us a line for some good Los Angeles bankruptcy lawyers that do Chap 11 cases.

      Summing up, tl;dr

      There are about half-dozen types of bankruptcies. We took a good look at Chapter 7 vs 13 vs 11. But the real comparison is between Chapter 7 vs Chapter 13. While many bankruptcy attorneys steer people to Chapter 7 bankruptcy because that’s all they know, Chapter 13 bankruptcy has some advantages over Chapter 7. When you interview your Los Angeles bankruptcy attorneys, make sure they do both. Our Chapter 7 success rate is over 99%, and our Chapter 13 success rate is over the double the national average.

      I’d consider it an honor to get the chance to help you.

      Contact us now.

        california median income

        California Median Income Hits New High

        California Median Income Reaches Historic Milestones

        The California median income is a good guide to how well residents in the Golden State are doing financially. The California economy (until the pandemic) was sitting pretty, and its citizens are earning income. The numbers used to qualify for a “straight bankruptcy” have broken some very notable milestones.

        2023 Update: The 2023 median income numbers were just released, to take effect on November 1, 2022. The California median income for a one-person household is now $69,660, almost $10,000 higher than when this article was written two years ago. Read the updated median income piece.

        Recent California Median Income

        Starting on April 1, 2020, median income for a household of one in Calif has broken the magic $60,000 threshold. The median income for a household of one in the Golden State is now $60,360.

        Even more amazing, a family of four has a California median income of $101,315. This is the first time in recent memory, if ever, that a median household of four in Calif has earned six figures.

        The significance of these numbers — $60,000 and $100,000 — applies to bankruptcy. The Department of Justice uses numbers from the Census as a preliminary measuring stick. They’re used to assess whether a debtor or debtors qualify for Chapter 7 bankruptcy. Not everyone is eligible, with the alternative being debt repayment with high income. In theory, people earning $60,000 and $100,000 would ave a relatively easy time doing a bankruptcy and not repaying their debt.

        See our median income article for a more thorough explanation. Also, you’ll find updated numbers, and the median income amounts used for other household sizes. The values change frequently, and by the time you read this page may have gone down due to COVID-19’s impact on the economy, so check that link for the latest amounts.