New Median Income Numbers
by: Jonathan Goldsmith Cohen
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Part of determining whether an individual qualifies for Chapter 7 or Chapter 13 Bankruptcy can hinge on your families “Median Income”. If you are substantially over the Median Income, this could mean that you are ineligible for a Chapter 7 Bankruptcy and have to pay back a portion of your debt through a Chapter 13 Bankruptcy over 36 to 60 months.
What Is Median Income Mean?
Median Income is determined by the number of individuals in your household and where you live. The median income numbers for New Jersey were recently revised and are effective as of November 2013:
- 1 Person: $60,317.00
- 2 People: $70,150.00/li>
- 3 People: $85,575.00/li>
- 4 People: $103,946.00/li>
Add $8,100.00 for each individual over 4 people
From Median Income to the Means Test
If you are over the Median Income, the “Means Test” must be applied. The means test is a Federal Bankruptcy Form which takes your gross income and deducts your taxes, and all necessary expenses as determined by the IRS, Federal Bankruptcy Code, and relevant bankruptcy case law from your gross income. It has over 90 different lines and components. After deducting all expenses, the number left over is called your “disposable monthly income.” For example, if after the Means Test is applied you are left with $250.00 in disposable income, this could mean $250.00 of repayment on your debts for the duration of a Chapter 13 Bankruptcy. Right now, in our federal district, if you are over the median income and filing a Chapter 13 Bankruptcy, the trustee would require repayment at this amount for 60 months.
Who Determines What Chapter of Bankruptcy You Qualify For?
Do not attempt to figure out what chapter of bankruptcy you qualify for on your own! It’s my job as your bankruptcy lawyer to do the Means Test. The Means Test is nuanced and jurisdictional variables, case law, and trustee specific requirements affect what one’s disposable income is. I do this calculation myself after looking at a client’s past six months of income from all sources and all of their expenses. I look forward to helping you determine whether you can file a Chapter 7 or Chapter 13 Bankruptcy and the advantages and disadvantages to each chapter.