Tag: means test

median income limits

2024 Median Income Limits to Nail Bankruptcy Means Test in Calif

Posted by Hale Andrew Antico on

Median Income Limits to Nail the Bankruptcy Means Test: 2024

The government just updated the numbers for 2024 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.

Summer 2024 Update:  The numbers for the means test adjusted May 2024 and will be used for the latter part of 2024.

Because of the above statement, these will be the last updated 2023 median income limits.

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means test for chapter 7 bankruptcy

Bankruptcy Means Test: a calculator, and a trick to pass (2024)

Posted by Hale Andrew Antico on

Bankruptcy Means Test for Chapter 7 in California, and Everywhere Else

Bankruptcy means test for Chapter 7 was created by Congress to decide if you qualify for liquidation or straight bankruptcy.  Here is what it is, some answers to common bankruptcy means test questions, and a weird tip on passing the bankruptcy means test and its median income limits (ok, it’s not weird, but I think you’ll find it helpful).

Historically, there was no bankruptcy income limit

Before 2005, any income earner could, in theory, file Chapter 7 bankruptcy. There was a time in those days where a single person filing bankruptcy could earn $8,000 a month after taxes and still get a discharge. The credit card companies lobbied Congress to change the law and make it harder to qualify. In response, Congress passed a bankruptcy reform called BAPCPA in 2005. One of the new provisions was to add a means test so that the more someone earned, the harder it became to qualify for Chapter 7.

What is the Bankruptcy Means Test

The bankruptcy means test is a long form that asks how much money someone has earned recently. It starts by determining a) what your “current monthly income” is. Then, it compares that to b) a median income limit for their state, for a similar-sized household. If your income is less than the magic number, you pass the means test for Chapter 7.  Consequently, you can file bankruptcy that way.

Figuring Your Current Monthly Income

Once you’ve figured out which income limit number is the standard for your state, you now need to compare against it your current monthly income. And like most things in bankruptcy, this is not as straightforward as it seems.

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social security income bankruptcy keep out

Social Security Income and Bankruptcy: What You Need to Know

Posted by Hale Andrew Antico on

Social Security Income and Bankruptcy: What You Need to Know

Does Social Security income count in a bankruptcy?  It may make the difference between a Chapter 7 “straight” bankruptcy where you don’t pay the debt, and Chapter 13, where you do.

In Chapter 7 bankruptcy, income is used to determine whether someone qualifies in two different places. The first is the Form B22, or “means test.” The second is the actual budget. So let’s look at whether Social Security factors in those one at a time.

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401k retirement contributions and loans in bankruptcy

401(k) Retirement Loans & Contributions in Bankruptcy: Explained

Posted by Hale Andrew Antico on

401(k) Retirement Loans & Contributions in Bankruptcy: Explained

Are 401(k) contributions allowed in a bankruptcy? What about retirement loans? We all know it’s wise to save for our future, but can you contribute to retirement plan like 401k or 403b if you’re filing bankruptcy? In the Ninth Circuit, it depends.

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Welsh is a gift from the 9th Circuit for every bankruptcy attorney

Chapter 13, Social Security, & Luxury Debt: A Case you Must Know

Posted by Hale Andrew Antico on

Chapter 13, Social Security, & Luxury Debt: A Case you Must Know

Why Welsh is the greatest Chapter 13 case ever

Every now and then, courts pass down a ruling on a subject that is so practical and a decision so favorable to consumer debtors that it’s as if the heavens opened, angels sang, and cherubim hand-delivered a gift to attorneys far and wide on the wings of a unicorn. The Ninth Circuit’s In re Welsh is such a case.

Introduction

On this, the ten-year anniversary of In re Welsh, 711 F.3d 1120 (9th Cir, 2013), it seems relatively few attorneys know about this ruling, and how it can benefit debtors. Or at least, far fewer bankruptcy lawyers know about this than should. Yet we all should have it tattooed on the inside of our eyelids.

So, with the goal of getting the word out there, and celebrating a decade of relative anonymity, here’s a loud and triumphant commemoration as a monument to one of the greatest debtor cases in bankruptcy jurisprudence, and all of its varied folklore.

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Surplus Income, Bankruptcy, and Nonconsumer or Business Debt Avoids the Maze of the Means Test

Nonconsumer Debt + No Means Test = Chap 7 Discharge? A Deep Dive

Posted by Hale Andrew Antico on

Nonconsumer Debt + No Means Test = Chap 7 Discharge? A Deep Dive

A Look at Surplus Income and Nonconsumer Debt, Skipping the Bankruptcy Means Test, and if the Case Law Leads to Chapter 7 Success

Does having primarily nonconsumer debt give someone a shortcut to Chapter 7 discharge? Generally, Chapter 7 is for people who can’t afford to repay debt. There’s a means test that makes someone eligible for Chapter 7. However, there appears to be a loophole that allows someone with primarily nonconsumer debt to skip the means test. Does that shortcut mean high-income debtors with primarily non-consumer debt are on easy street to Chapter 7 discharge?

The Issue: Why Nonconsumer Debt May Help Chapter 7 Discharge

Debt can be categorized as either consumer or nonconsumer. The big difference is if the debt is nonconsumer, you can skip the means test, and squeeze into Chapter 7 bankruptcy.

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california median income

California Median Income Hits New High

Posted by Hale Andrew Antico on

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.

Nov 2023 Update: The updated 2023 median income numbers were released, which took effect on November 1, 2023. The California median income for a one-person household is now almost $10,000 higher than when this article was written three years ago.  Read the updated median income piece.

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