Jacksonville Bankruptcy Courts take into account who lives with you when you file bankruptcy and, depending on the chapter of bankruptcy you file, they may consider those people in different ways. I don’t mean to imply that the character of the people you live with matters. It makes no difference if you’re living with Tim Tebow or Timothy McVeigh. What matters is whether those living with you are dependent on you for most of their care and if they aren’t, the court wants to know if they make regular contributions to the household.
A regular contribution to the household is any payment of money to or on behalf of the person filing bankruptcy. A good example of this is when someone’s mother pays their phone bill every month. Their mother’s intent is to help them out a bit and have them call more frequently. By paying for that utility, it frees up more money for the debtor and so that debtor has more money to pay bills. A regular contribution from anyone counts, but most contributions come from people who live in the same home, such as boyfriends, girlfriends and roommates.
When figuring out which chapter of bankruptcy best suits your situation (if any), your lawyer should take your basic income information and preform a cursory, “Bankruptcy Means Test“. The Means Test was created by the U.S. Legislature in 2005 and requires that anyone wishing to file a Chapter 7 bankruptcy show that their income is lower than average for their family size than the average American household of the same size in their area. There are exceptions to this test for active military and some business holders, but generally this income test is required.
The IRS publishes the average American household incomes by family size every year. This amount is referred to as the, “Median Income”.
Your family size is made up of you and your dependents. Dependents often include your spouse and children but can also include elderly parents or other dependent relatives. You may notice that roommates and unmarried partners are not counted here. In addition to including the members of your household in the calculation of your family size, you must also include any income the members of your household makes.
So, if you make $30,000 and your spouse makes $30,000, your combined income for a family size of two is $60,000. The average income for a family size of two in Florida is $49,729 right now, so your income would be high to qualify for Chapter 7. However, if you had a roommate instead of a spouse and that roommate paid $500 per month in bills, your household income would be your $30,000, plus $6000 (12 months x $500). Since the average income for a family size of one in Florida is $40,766, you’d now qualify for a Chapter 7. These calculations can get complicated, especially since there are several deductions that can be taken from a debtor’s income.
Your family size can have an enormous impact on your options in bankruptcy which can mean the difference between finishing your bankruptcy in five months or five years. Due to the complicated nature of bankruptcy means testing, it is difficult if not impossible for someone to do without professional help. If you would like more information on Means Testing or bankruptcy generally, call us at (904) 685-1200 for a free consultation.