New Means Test Numbers Effective November 1, 2015

Median Income IncreasePeriodically, the ‘median income’ numbers are adjusted by the U.S. Census Bureau and published by the office of the United States Trustee. Median income is roughly the amount of money that an average family makes annually on a state-by-state basis.
The numbers in Texas will be increasing as of November 1, 2015, as shown on the below chart:

Median Income Figures for Texas

Household Size1234Figure to add for every household member over 4
CurrentMedian Income$42,908$58,666$61,502$71,973$8,100
As of November 1, 2015$44,178$59,296$62,636$72,612$8,100

This change can affect both people about to file Chapter 7 bankruptcy and people about to file Chapter 13 bankruptcy. In Chapter 7 cases, a bankruptcy analysis usually begins by comparing the household income (based on the previous 6 months) to the median income. For a person whose household income is over the median income, the ‘Means Test’ (a government test beyond the scope of this post) gets more complicated, and the person may or may not be eligible for a Chapter 7 bankruptcy.
Anyone filing Chapter 13 bankruptcy must also compare their household income to the median income. If the person’s household income is less than the median income, they are eligible to file a 3-year Chapter 13 bankruptcy plan. People over the median imcome may file a 5-year Chapter 13 bankruptcy plan. In addition, the Means Test may dictate that someone pay back their unsecured creditors (such as credit cards and medical bills) during their Chapter 13 bankruptcy. The larger the difference between the household income and the median income, the higher the Chapter 13 bankruptcy plan payment will need to be.
So what does the increase in median income mean for folks considering filing bankruptcy? For some, it may mean they now qualify for a Chapter 7 bankruptcy when they did not previously qualify based on their household income. For others, it may mean they will be able to file a shorter Chapter 13 bankruptcy plan or pay less per month in their Chapter 13 bankruptcy. The impact of these numbers is not quite that simple, but the overall impact is good for consumers who are in need of the financial fresh start provided by filing bankruptcy.
The new numbers for all states can be viewed on the U.S. Department of Justice Website.
The information contained in this blog is for general information and educational purposes and is not legal advice. Reading these posts does not create an attorney/client relationship.