2021 Median Income Limits for Bankruptcy Means Test
The 2021 median income numbers took effect in May 2021. It again got easier to qualify for Chapter 7, because of a means test adjustment. The means test for bankruptcy decides who qualifies for Chapter 7 bankruptcy eligibility.
Covid update: these unique and uncertain times, with many people are getting helped by pandemic benefits, as well as eviction and foreclosure moratoriums. It’s possible the 2021 or 2022 California median income may go down.
Step one of this process is comparing your household income against the income limits set by the DOJ to see if you earn less than California median income limits. So, someone may not qualify according to the means test in one month but after the changes they do, or vice-verse. The new numbers took effect on May 15, 2021, but are temporary, and when the pandemic ends, the numbers may decrease.
Means Test: 2021 Median Income Adjustments updated in May
Every now and then, the government updates these numbers. They just did it again in May 2021. Good news: the California 2021 figures are now higher, increasing household income for bankruptcy means test qualifying. This means that more people could qualify for Chapter 7 bankruptcy using the 2021 median income numbers.
2021 Median Income for California Households
Because the income levels of Californians change maybe once or twice a year, these recent changes in May 2021 will be the first numbers used for 2021. You’ll see below there’s talk about household size.
It isn’t always clear who counts in a household. There may be a difference if you have a roommate who pays rent. What if you’re married? Or have kids but they’re adults. Do you live with your significant other, who has their own finances? They’re all in your household. Or, maybe they’re not.
Call and let’s meet to talk about it. But below are the California median income limits for the various household sizes.
California household size and California median income for Bankruptcy
- 1-person household: $62,938
- 2-person household: $83,435
- 3-person household: $92,735
- 4-person household: $106,530
- Each additional person: $9,000
First, this is not rigid. Just because someone earns less than the 2021 median income, it’s not certain they qualify for Chapter 7. Also, if someone earns over the California numbers for their household size, it doesn’t mean they’re ineligible. This is just the starting point on a very long form. An experienced bankruptcy attorney can help someone who is over the median complete the bankruptcy means test and still file Chapter 7 in many situations.
Don’t fret if your income doesn’t make the cut; there’s still an option. Pay back a portion of your debt while freezing interest from accruing. Also, you get peace of mind by preventing lawsuits and wage garnishment. This is better than debt consolidation, and is called Chapter 13. And yes, it’s even better than paying minimums, since by just paying minimums you’ll never get out of debt.
Finally, bookmark this page and return often. While these numbers took effect on May 15, 2021 they will change again, especially with the coronavirus making the economy’s status uncertain. Chances are the California median income numbers will drop before December 2021. Update: the DOJ announced it won’t be adjusting the median income limits until Spring 2022. If this happens, it will make it harder to qualify for Chapter 7.
So, you may not want to wait to file a bankruptcy. Or maybe you do. Strategy is a big part of what I do. Let’s figure out your best option.
If you found this helpful, contact me and let’s arrange a consultation in person or video if you’re anywhere in Los Angeles County. I specialize in fresh starts, with compassion.