Monday, June 13, 2011

Are There Income Limits to File Bankruptcy?

There are income limits for a chapter 7 case, but if you're above the limit that doesn't mean you can't file. What it does mean is that you must be able to pass the means test to qualify for a chapter 7 discharge.

If you are leaning towards a chapter 13, then you really don't need to worry about qualifying based on your income. You do, however, need to consider your income and expenses to find out how much the payment plan will entail paying each month.

The income limit imposed by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) requires that any petitioner seeking a chapter 7 debt discharge prove a "need". What this means is that if your income is above the median income for your state and family size, you will need to complete and pass the means test.

First Step: Check Your States Median Income
Find your state in the chart below, and you will see three income numbers based on the number of people in your household. If your household income is above the median, you must take the means test.

One

Two

Three+


One

Two

Three+

AL

$38,018

$70,015

$85,621

MT

$37,954

$68,000

$88,037

AK

$51,112

$89,785

$118,346

NE

$38,287

$70,309

$88,339

AZ

$41,915

$74,461

$92,045

NV

$42,346

$76,027

$96,008

AR

$32,304

$63,508

$79,668

NH

$50,630

$86,462

$106,235

CA

$47,234

$86,906

$97,571

NJ

$58,107

$102,955

$119,698

CO

$47,814

$83,137

$98,864

NM

$36,672

$69,503

$84,915

CT

$56,929

$100,833

$117,818

NY

$45,548

$88,327

$109,333

DE

$47,634

$85,535

$107,920

NC

$37,171

$72,194

$85,472

FL

$39,383

$69,898

$85,308

ND

$40,774

$72,786

$90,289

GA

$38,748

$75,790

$88,413

OH

$40,091

$74,488

$91,812

HI

$49,846

$86,149

$116,809

OK

$36,289

$68,361

$86,278

ID

$38,420

$62,729

$78,704

OR

$43,986

$72,113

$87,238

IL

$45,607

$83,149

$99,615

PA

$44,172

$78,250

$98,043

IN

$39,487

$71,299

$90,391

RI

$45,391

$86,886

$102,328

IA

$39,803

$72,320

$88,700

SC

$36,457

$69,729

$87,343

KS

$40,982

$72,680

$92,214

SD

$35,008

$66,399

$80,345

KY

$36,999

$68,960

$89,397

TN

$37,528

$68,357

$85,101

LA

$37,493

$74,933

$94,866

TX

$37,676

$74,750

$86,196

ME

$38,860

$69,347

$88,243

UT

$49,818

$67,893

$95,781

MD

$54,874

$102,736

$122,598

VT

$42,347

$76,056

$92,223

MA

$54,161

$98,513

$119,700

VA

$49,484

$88,825

$108,017

MI

$41,875

$74,517

$90,974

WA

$49,124

$84,439

$100,832

MN

$45,022

$81,592

$98,019

WV

$39,109

$67,419

$87,527

MS

$32,131

$64,262

$83,046

WI

$40,486

$75,608

$92,303

MO

$38,697

$71,181

$91,311

WY

$45,427

$76,314

$94,714
Source: USDOJ

If You are Below the Median
If your income puts you under the median in your state, then yours is a simple case. You can file for chapter 7 and get a "straight" discharge of your debts.

If You are Above the Median
If your income puts you above the limit for your state, then you will need to pass the means test to prove you are "not abusing" the bankruptcy laws before you can qualify for a chapter 7.

What is the Means Test?
The means test is a series of calculations designed to determine if you would be able (have the "means") to repay some of your debts in a chapter 13 case. Click here for the actual test form. You'll see it's a bit complicated (seemingly unnecessarily) but the end result is that your disposable income is calculated to figure out how much there is to pay towards your debt. It's much easier to print out the form and work it the "old school" way with a pencil and a calculator.

Learn More
Here are some related posts from this blog and articles on other sites:

Posts
Who Can File for Bankruptcy?
What Does Filing Bankruptcy Do?
The "Should I File Bankruptcy" Test

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