Written by: Mehnaz I. Khan, Esq.
In order to get a discharge under chapter 7 bankruptcy relief, you must meet certain criteria. Among other things your income from all sources in the last six months should be less than or equal to the median income as specified in the median income guidelines. The median income depends on the locality of the debtor’s residence and the size of the debtor’s household. Higher the size of the household, greater is the median income (the allowed income to be qualified for chapter 7 without a presumption of abuse). These median income guidelines are revised periodically to accommodate a cost of living increase. E.g., in Northern Virginia, an annual median income for a family of one is $52,436.00; for the household of two the median income is increased to $67,021.00, for the family of three the median income is $75,044.00, and so on.
If a debtor’s income is less than or equal to the median income, no problem. However, there are certain debtors whose annual income is greater than the guideline median income. Does that mean this debtor will not be able to qualify for chapter 7 relief? The answer is No. This debtor can still be qualified to get a relief under chapter 7 bankruptcy provided he has certain monthly expenses, e.g., monthly mortgage payments on a real property debtor wishes to keep, or a monthly car loan payment on a car debtor wishes to retain, certain tax payments, certain domestic support obligations, etc. These expenses are generally allowed to be deducted from the debtor’s monthly income while running a means test.
In summary, if a debtor’s monthly/annual income is more than a specified median income, he should not get discouraged. He can still be qualified to get a chapter 7 bankruptcy relief. Talk to your bankruptcy attorney to find out what options are available to you.