Median income is a critical measure in bankruptcy upon which the ‘Means Test’ calculation is largely based to determine whether a debtor qualifies for Chapter 7 bankruptcy versus Chapter 13. Essentially, if a debtor’s annualized gross income exceeds the median income for their household size and state of residence, they are generally (but not always) ineligible for Chapter 7 bankruptcy and instead steered toward a five-year Chapter 13 repayment plan. In Chapter 13, median income also determines whether a debtor is required to do a 5-year plan when above-median income or 3-year plan when below-median income.
It’s also important to note that annualized gross household income is determined by doubling all household income from all sources for the last six full calendar months prior to filing bankruptcy. Chapter 13 bankruptcy is a more likely outcome than Chapter 7 when this annualized income is above the applicable state median income. The Means Test calculation and eligibility for Chapter 7 is more complicated than simply a measure against median income and various other factors including mortgage payment, mortgage arrears, taxes owed, domestic support obligations, and a number of other considerations also figure into the means test calculation.
As of May 1, 2014, the annual gross median income in Minnesota for the purposes of bankruptcy is as follows:
1 Person 2 People 3 People 4 People 5 People
$49,592 $65,398 $78,715 $92,277 $100,377
State median income is determined by Census Bureau data and adjusts at least annually. The latest adjustment is effective April 1, 2014 and the next adjustment date is expected approximately November 2014.
To read more about Median Income and the Means Test, see What is the Median Income in Minnesota and How Does is Factor into Chapter 7 Bankruptcy and What is the “Means Test” and Why Does it Matter in Bankruptcy”?
Wartchow Law Office is a law firm located in Edina, Minnesota with an exclusive practice in Chapter 7, Chapter 13 and Chapter 11 bankruptcy law, representing individual consumer and business clients throughout the Twin Cities of Minneapolis and St. Paul, Minnesota.