What Is My Household Size And How Does It Affect My Bankruptcy?
Whether you file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, you will have to file a “means test”. The means test determines whether your qualify for Chapter 7 Bankruptcy, or how much you must repay to unsecured creditors in a Chapter 13 Bankruptcy.
The means test sets a median income for households in each state; the larger a household, the higher the median income. But who qualifies as a member of your household? Unfortunately, it is not entirely clear. Congress failed to define the term in the bankruptcy code, and the determination of household size has been left to the bankruptcy courts. Three different interpretations have been offered. The first approach, and the one most favorable to debtors, is the “heads on a bed” approach. This allows debtors to determine their household size based on the number of people residing in the home. The second approach, and the one least favorable to debtors, is the “IRS dependent” approach. This allows the inclusion only of members that can be claimed as dependents on tax returns. The third approach, and one that seems to be gaining favor by the courts, is the “economic unit approach”. This seems to be the most equitable approach.
The calculation of your household size is an important factor in determining whether you qualify for Chapter 7 Bankruptcy or what you must repay to unsecured creditors in a Chapter 13 Bankruptcy. It is important that you meet with an experienced bankruptcy attorney to determine what your applicable household size is.