Effective November 1, 2016, families with incomes, excluding Social Security, below that number are excused from even taking the means test.
How do you measure up?
The means test, of course, was Congress’s oh-so-clever attempt to write a formula that would determine which Americans “needed” bankruptcy. All others were presumed to be abusing the system.
Care to guess how good Congress was at doing it? Yeah. The short, reasonably polite, answer is not very good. But that’s another post, another day.
Below median income
Median is the point in a range of numbers where half of the numbers are smaller and half are larger. Families in the lower income half don’t have to worry about “qualifying” for bankruptcy.
Those in the upper half of incomes have to complete the balance of the means test form to see if the Congressional formula says they are good to go, or whether they have a problem.
The income numbers used in the means test are state specific. They come from the Census Bureau.
The median income in California is about 50% higher than the median income in Mississippi. Income variations within the state are ignored. So, lots more people in Susanville get a pass on the means test than in Cupertino.
California means test figures
Median California family incomes have increased since the numbers announced in May, 2016.
Across family sizes, the new numbers are
- One person $51,763
- Two people 66,370
- Three people 74,224
- Four people 83,012
You can get the new numbers for all states from the USTrustee’s site.
Above median families not barred from bankruptcy
The biggest misconception floating around the internet is that above median income families can’t file bankruptcy.
They just have to fill out the balance of the form according to the peculiar formula Congress dreamed up.
And even if the form’s answer is disqualifying, you can argue special circumstances that show that you do really need bankruptcy.
Think of the means test this way: it’s a three part test.
The first part is true or false: are you above or below median?
The second part is multiple choice: do your projected living expenses, part real and part formulaic, leave you with nothing at the end of the month?
The third part is essay: is there something about your situation that makes the formula inaccurate?
Toying with the test
The means test is quirky and, at base, illogical. Sorry Mr. Spock. It takes historic income and compares it to future expenses. Huh?
People with primarily business or tax debt are excused from the test, regardless of their incomes.
Child support income is treated one way in Chapter 7 and another in Chapter 13.
So, don’t assume that on line, do-it-yourself calculators give you a reliable answer. Get capable, focused legal help if you are over median and need a fresh start.