What are the Income Requirements to Qualify for Chapter 7 Bankruptcy?

Your median household income is the first quaification for whether an individual or household qualifies for Chapter 7 Bankruptcy

As of November 1, 2009, in Washington State the median income table is as follows:

Household of One: $51,344.

Household or Family of Two: $64,158.

Household or Family of Three $72,533.

Household or Family of Four: $82,716

Add $6,900 for each household or family member in excess of 4.

Who Does the Bankruptcy Court Define Monthly Income?

For purposes of consumer bankruptcy your gross monthly income includes:

1.  Your average gross (before taxes and other deductions are taken out) income over the past six months.  This includes your wages as an employee and/or business income. 

2.  Spouse’s gross income (unless you are separated) whether or not your spouse is also filing for bankrupty. 

3.  Any contributions to your household expenses by other persons (gifts from family, etc).

4.  Child Support

5.  Retirement Distributions made in the past 6 months.

Current Monthly Income does NOT include any of the following income:

• Social Security Income.

• Social Security Disability Income.

• Crime and Terrorism Victim Compensation

If your Current Monthly Income is less than the state median family income for a household of your size then you will qualify for Chapter 7 bankruptcy if after your reasonably and necessary living expenses, you do not have less than $100 per month left over at the end of the month. 

Can I Qualify for Chapter 7 Bankruptcy if my Household Income is the State Median Income Level?

Yes, in many cases.

To qualify for Chapter 7 Bankruptcy where your current monthly income is greater than the state median family income for a household of your size, the Bankruptcy Court will apply a "Means Test" where your monthly income minus your allowable expenses (these may or may not be the actual amounts you spend on your basic living expenses) is analyzed and compared to the total amount of your unsecured debt.  

If your Current Monthly Income minus your reasonable and necessary monthly living expenses leaves with more than $100 per month to repay a certain portion of your debts over time, you will not be eligible for Chapter 7 Bankruptcy, but will still be eligible to file for Chapter 13 bankruptcy. 

In most Chapter 13 Bankruptcy cases where your gross household income is above the state median, only a portion of your debts will be repaid (usually over a 60-month period) and any unpaid portion of your debts will mostly likely be discharged at end of the repayment period. 

The Means Test is complex and requires the consultation and analysis of an experienced bankruptcy attorney.

For a Free Phone or Office Consultation, Call 206-624-3644 to speak with one of our experienced Washington State Chapter 7 bankruptcy lawyers.