Starting on April 1, 2023, new median income figures will be used to determine whether a debtor qualifies for a Chapter 7 bankruptcy. Median household income has recently increased due to several factors, including an increase in wages. A debtor filing a Chapter 7 bankruptcy must pass the means test, in order to qualify for a Chapter 7 bankruptcy. The means test looks at a debtor’s income from the previous six months prior to the time of their bankruptcy filing, and the debtor’s income must be under the state’s median household income in order to qualify for a Chapter 7 bankruptcy.
A debtor’s income includes the total income of the debtor’s household. This means that if a debtor has a spouse and two children living at the household, the household income includes the debtor and their spouse’s combined income from the previous six months, and that income will be compared to the median income for a household size of four in the state the debtor resides.
In the state of Minnesota, the new household income starting on April 1, 2023 for a single individual is $71,643. For a household size of two: $90,946. For a household size of three and four: $114,267 and $141,324, respectively. With the new median household income values starting on April 1, 2023, a debtor who was previously close to passing the means test but did not, may now be able to file a Chapter 7 with these new median income values. If a debtor does not pass the means test, a Chapter 13 bankruptcy may be filed instead, whereby the debtor will pay a portion of their debts through a three-five year repayment plan. It is advised that a debtor seeks the advice of an experienced bankruptcy attorney to determine whether the means test is passed. A debtor interested in filing a Chapter 7 bankruptcy, will need to provide their bankruptcy attorney with their previous 6 months of paystubs, as well as their spouse’s paystubs, if their spouse was working in the previous 6 months. An experienced bankruptcy attorney will review the debtor’s gross income and/or their spouse’s gross income, including any bonuses received, and determine whether the means test is passed.
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