2020 Median Income Limits for Bankruptcy Means Test
The 2020 median income numbers took effect in April. 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.
Coronavirus update: with 36 million Americans filing for unemployment in the past 2 months since the lockdown began, the 2020 California median income will almost certainly go down soon.
Step one of this process is comparing your household income against the median income limits set by the DOJ to see if you earn less than California median income limits. The 2020 median income adjusts. 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 April 1, 2020, but are temporary, as the tanking economy means they’ll likely fall soon.
Means Test: 2020 Median Income Adjustments updated in November
Every now and then, the government updates the median income limits. They just did it again in November 2019. Good news: the California 2020 median income numbers are now higher, increasing household income for bankruptcy means test qualifying. This means that more people could qualify for Chapter 7 bankruptcy using the 2020 median income numbers.
2020 Median Income for California Households
Because the California median income changes maybe once or twice a year, these recent changes in November 2019 will be the first numbers used for 2020 median income. 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: $60,360
- 2-person household: $79,271
- 3-person household: $88,235
- 4-person household: $101,315
- Each additional person: $9,000
First, this is not rigid. Just because someone earns less than the 2020 median income, it’s not certain they qualify for Chapter 7. Also, if someone earns over the California median income, 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 April 1, 2020 they will change again, especially with the coronavirus ravaging the economy. Chances are the California median income numbers will drop before December 2020. This will make it harder to qualify for Chapter 7.
So, you may not want to wait to file a bankruptcy. 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.