As many of you know, one of the main factors used to determine which chapter of bankruptcy a case is filed under (for instance, Chapter 7, Chapter 11, or Chapter 13) is the infamous “means test.” The means test averages all income received in the six months prior to filing and compares that to the Census Bureau’s “Median Income” for the state.

The poor economy in Michigan has, as of November, 2010, forced the median income numbers down again, making it that much more difficult for prospective Chapter 7 Bankruptcy filers to pass the means test and get into a Chapter 7 bankruptcy.

Now, and after the start of the year, the median income figures in the State of Michigan are:

  • Household of 1: $41,875 per year
  • Household of 2: $49,919 per year
  • Household of 3: $59,190 per year
  • Household of 4: $70,600 per year
  • For households over 4 persons: $70,600 per year, plus $7,500 for each person over 4

If your entire household earns less than the median income for a household of its size in the state in which you reside, then Chapter 7 is available. For instance, a household of 4, which might consist of a father, mother and two children, earning on average $60,000 would “pass” the means test and be eligible for Chapter 7. On the other hand, a single filer living alone earning $50,000 per year would bear a “presumption of abuse” in the filing of a Chapter 7 bankruptcy petition. Our hypothetical single person might have to file a Chapter 13 case and repay a portion of their debt.

But things are not always so clear. The means test is a complex formula that does allow for numerous deductions. It is often possible for a debtor who is technically above the figures listed above to pass the test and still successfully file a Chapter 7 case.

If you are a Michigan resident and are considering filing for bankruptcy and have questions regarding your eligibility or regarding any other part of the process, please contact me at [email protected] or (248) 246-6536 to schedule a free, initial consultation.

Means Test Median Income Figures Reduced Again for Michigan Bankruptcy Filers

As many of you know, one of the main factors used to determine which chapter of bankruptcy a case is filed under (for instance, Chapter 7, Chapter 11, or Chapter 13) is the infamous “means test.” The means test averages all income received in the six months prior to filing and compares that to the Census Bureau’s “Median Income” for the state.

The poor economy in Michigan has, as of November 1, 2010, forced the median income numbers down again, making it that much more difficult for prospective Chapter 7 Bankruptcy filers to pass the means test and get into a Chapter 7 bankruptcy.

Now, after November 1, 2010, the median income figures in the State of Michigan are:

Household of 1: $41,875 per year

Household of 2: $49,919 per year

Household of 3: $59,190 per year

Household of 4: $70,600 per year

For households over 4 persons: $70,600 per year, plus $7,500 for each person over 4

If your entire household earns less than the median income for a household of its size in the state in which you reside, then Chapter 7 is available. For instance, a household of 4, which might consist of a father, mother and two children, earning on average $60,000 would “pass” the means test and be eligible for Chapter 7. On the other hand, a single filer living alone earning $50,000 per year would bear a “presumption of abuse” in the filing of a Chapter 7 bankruptcy petition. Our hypothetical single person might have to file a Chapter 13 case and repay a portion of their debt.

But things are not always so clear. The means test is a complex formula that does allow for numerous deductions. It is often possible for a debtor who is technically above the figures listed above to pass the test and still successfully file a Chapter 7 case.

If you are a Michigan resident and are considering filing for bankruptcy and have questions regarding your eligibility or regarding any other part of the process, please contact me at [email protected] or (248) 246-6536 to schedule a free, initial consultation.