Bankruptcy

Roommates Sharing A Rented House With Separate Leases Are A Two-Person Household For Bankruptcy Means Test

By Jonathan Alper

A debtor?s income relative to the applicable median income is important. Debtor?s below median income are exempt from the means test, whereas those above median income must qualify under the means test to file Chapter 7 bankruptcy. Your applicable median income depends on the number of people in your "household." In some cases, the definition of "household" is crucial to determine your median income and your eligibility for Chapter 7 bankruptcy. In most traditional families household size is obvious; it?s the number of family members living under the same roof. I have one client who seeks to file Chapter 7, but the size of his household is not clear. This client is unmarried. He lives with an unrelated roommate in a rented house. Each roommate has a separate lease with the landlord. They have separate bedrooms, but otherwise share all other rooms in the house and share a common entrance.

The question is whether my client lives in one person household or a two-person household for purposes of the means test. His income is below the median income for a two person household and above the median for a one-person household. The U.S. Trustee will probably argue that since the client and his roommate do not pool their income or share most of their expenses that they each constitute a separate household living in separate bedrooms with separate leases. I found a bankruptcy decision from a Minnesota bankruptcy judge which reaches the opposite conclusion in a very similar fact situation. The judge said that where two roommates have separate leases and pay separately most expenses the level of separateness does not meet the definition of separate housing units pursuant to the Census Bureau?s definition of housing units. The court found that either roommate filing Chapter 7 bankruptcy would use the median income applicable to a two person household. The case is In re Bostwick, Case No. 08-46026 in Minnesota.

Full post as published by Florida Bankruptcy Law on July 08, 2009 (boomark / email).