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Bankruptcy Means Test Gets Meaner

By Jill Michaux, Kansas Bankruptcy Attorney

The bankruptcy means test gets meaner on November 1, 2010, when falling income guidelines go into effect.  Consumers thinking of filing bankruptcy who may be close to the median income line should compare the BEFORE and AFTER figures.  Filing bankruptcy by Halloween may be a good idea for some consumer debtors.

It is no surprise that in this down economy, with so many people without jobs or earning significantly less than in the past, that the American median family income is dropping. As the income drops, so do the guidelines for bankruptcy.  Ironically, as one makes less money and has more financial problems, it becomes harder to qualify for chapter 7 bankruptcy.

The bankruptcy means test relies on the median family income by family size compiled by the U.S. Census Bureau.  These figures are updated periodically.  The U.S. Trustee Program announced the figures to be applied to bankruptcy cases filed on and after November 1, 2010, yesterday.

In Kansas, for example, median income dropped for one, two and four person households and increased $604 for three person households.  The result will vary from state to state and household size to household size.  On average, an estimated five per cent drop in income was anticipated in these new census figures.

The means test was created to determine one’s ability to pay her general unsecured creditors. Consumers with income below the median, generally, may file a chapter 7 or chapter 13 bankruptcy.   Debtors with income above the median, must complete a long, complicated form detailing income and expenses, and may be required to file a chapter 13 payment plan.

This is not the first time income has dropped.

Here is a chart of the Census Bureau Median Family Income by Family Size for consumer bankruptcy cases filed on and after November 1, 2010:

(Cases Filed On and After November 1, 2010) The following table provides median family income data reproduced in a format designed for ease of use in completing Bankruptcy Forms 22A and 22C. The State Median Family Income by Family Size data is available for download in MS Excel format. [XLS - 27 KB] . FAMILY SIZE STATE 1 EARNER 2 PEOPLE 3 PEOPLE 4 PEOPLE * ALABAMA $38,018 $46,143 $51,613 $62,983 ALASKA $51,112 $74,242 $80,133 $84,577 ARIZONA $41,915 $54,510 $58,696 $66,030 ARKANSAS $32,304 $43,370 $48,799 $53,523 CALIFORNIA $47,234 $61,954 $67,562 $77,596 COLORADO $47,814 $63,635 $69,717 $82,621 CONNECTICUT $56,929 $70,800 $82,305 $101,647 DELAWARE $47,634 $61,424 $67,412 $83,928 DISTRICT OF COLUMBIA $48,034 $78,878 $78,878 $78,878 FLORIDA $39,383 $49,321 $53,713 $64,084 GEORGIA $38,748 $51,184 $55,767 $68,122 HAWAII $49,846 $63,143 $74,449 $85,190 IDAHO $38,420 $47,863 $54,558 $60,488 ILLINOIS $45,607 $59,104 $68,782 $79,788 INDIANA $39,487 $50,279 $58,075 $68,109 IOWA $39,803 $55,132 $62,485 $74,349 KANSAS $40,982 $56,251 $63,816 $68,154 KENTUCKY $36,999 $44,353 $51,046 $62,739 LOUISIANA $37,493 $45,950 $54,800 $66,154 MAINE $38,860 $50,767 $58,097 $67,361 MARYLAND $54,874 $73,291 $85,746 $101,693 MASSACHUSETTS $54,161 $67,142 $82,385 $100,462 MICHIGAN $41,875 $49,919 $59,190 $70,600 MINNESOTA $45,022 $60,694 $72,886 $83,772 MISSISSIPPI $32,131 $40,908 $46,299 $54,812 MISSOURI $38,697 $50,295 $57,664 $68,705 MONTANA $37,954 $51,566 $55,357 $66,825 NEBRASKA $38,287 $53,251 $64,429 $69,950 NEVADA $42,346 $56,612 $59,802 $69,371 NEW HAMPSHIRE $50,630 $62,509 $81,134 $88,538 NEW JERSEY $58,107 $69,539 $84,192 $99,474 NEW MEXICO $36,672 $51,018 $51,459 $52,842 NEW YORK $45,548 $56,845 $67,292 $82,587 NORTH CAROLINA $37,171 $49,813 $54,573 $66,487 NORTH DAKOTA $40,774 $55,501 $68,209 $78,352 OHIO $40,091 $50,491 $59,275 $71,453 OKLAHOMA $36,289 $48,909 $53,261 $63,004 OREGON $43,986 $54,656 $59,546 $71,593 PENNSYLVANIA $44,172 $52,839 $66,030 $78,626 RHODE ISLAND $45,391 $57,567 $71,019 $87,163 SOUTH CAROLINA $36,457 $49,685 $51,887 $62,056 SOUTH DAKOTA $35,008 $52,581 $57,845 $66,918 TENNESSEE $37,528 $46,432 $52,368 $62,197 TEXAS $37,676 $54,288 $55,534 $64,420 UTAH $49,818 $55,220 $60,944 $68,707 VERMONT $42,347 $57,013 $64,767 $77,127 VIRGINIA $49,484 $62,586 $72,078 $85,586 WASHINGTON $49,124 $62,204 $71,354 $81,269 WEST VIRGINIA $39,109 $41,919 $50,521 $59,307 WISCONSIN $40,486 $55,175 $65,187 $76,188 WYOMING $45,427 $59,847 $68,553 $75,129 * Add $7,500 for each individual in excess of 4. COMMONWEALTH OR U.S. TERRITORY FAMILY SIZE 1 EARNER 2 PEOPLE 3 PEOPLE 4 PEOPLE * GUAM $35,891 $42,913 $48,902 $59,178 NORTHERN MARIANA ISLANDS $24,101 $24,101 $28,040 $41,242 PUERTO RICO $20,930 $20,930 $22,640 $27,924 VIRGIN ISLANDS $28,476 $34,225 $36,491 $39,980 * Add $7,500 for each individual in excess of 4.

Source:  U.S. Trustee median_income_table 11 01 2010

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Full post as published by Bankruptcy Law Network on October 13, 2010 (boomark / email).