Question Detail: I was looking into Utah Chapter 7 bankruptcy, and I keep seeing rules about my ‘median income.’ What does median income mean? How does it affect my ability for file for Chapter 7? I currently make $42,000 per year, which I don’t think is exceptionally high, but now I’m worried that I can’t file bankruptcy because I have a job! I have so much debt from my younger days when I was stupid and ran up credit card debt; I should get the same opportunity to file for bankruptcy as anyone else.
Answer: Median income simply means ‘middle income’ or average income. It is based on the state you reside in and the number of people in your household. The concept of ‘median income’ became relevant in 2005 when the bankruptcy code was overhauled and the ‘means test’ was adopted. The stated policy behind the means test was to prevent abuse of the bankruptcy system, but the unwritten motivation was to make it harder to file Chapter 7 bankruptcy, thus resulting in fewer filings. In our opinion, the stated policy has probably been realized, but the unwritten motivation probably has not. In other words, you most likely don’t have anything to worry about. Even if you are over median income, you are not automatically disqualified from filing a Chapter 7. You will have to jump through some additional hoops but most people who are sincere in seeking debt relief will be able to do so and thus qualify for Chapter 7. For example, in Utah (as of 09/2011) the median incomes are as follows:
|Household Size||Annual Income|
add $7,500 for each additional individual The official median income figures can be found on the U.S. Trustee’s website:http://www.justice.gov/ust/eo/bapcpa/20110315/bci_data/median_income_table.htm The best source that we’ve seen on the internet to run the numbers yourself can be found at: http://www.legalconsumer.com/bankruptcy/means-test/Experienced bankruptcy attorneys are continuing to develop ways to deal with the means test, so it would be a good idea to search one out in your area. Have a question about bankruptcy in Utah? Craig Swapp & Associates Utah bankruptcy attorneys would be happy to answer it. Please submit your question online and we’ll respond as soon as possible.