How Do I Determine Household Size When I File Bankruptcy?
You may not know this, but how many people you have living in your home can make a big difference when you file bankruptcy. During your first consultation with a bankruptcy lawyer, we’ll ask you what your income has been and the number of people living in your home. Using those two numbers, we’ll be able to tell you whether or not you’ll be able to file Chapter 7 (liquidation bankruptcy) or Chapter 13 (reorganization bankruptcy). If you’ve been researching, you know that there is a world of difference between Chapter 7 and Chapter 13 bankruptcy.
Oddly enough, household size is not defined in the Bankruptcy Code. However, if we look at Bankruptcy Forms B22A and B22C, also known as the Means Test, household size or “applicable family size” consists of “the number that would currently be allowed as exemptions on your federal income tax return, plus the number of any additional dependent who you support.”
Clear as day, right? Let’s break it down a bit.
If your household just consists of you, or you and your spouse, our calculation is pretty cut and dry. If you have children in your home, we’ll want to know how old they are. If they’re minors, then that’s also fairly straightforward. Where we get into more complex issues is when you aren’t related to the other people in your home or they’re adults (even if they’re your children), because household size doesn’t just mean the number of people in your home. However, if the other in your home are allowed as exemptions on your federal tax return, then we can count them.
Any others in your home will have to pass the “financial dependency test” which asks whether or not the other members are financially dependent on you. That sounds like an easy test to pass, but it’s not. The US Trustee will want to know how long this economic dependency has lasted. Someone living in your home for a short time and who has a job is probably not going to pass the test. But even if we include them in your household size, we also have to count some, if not all, of their income. That might push you over the median income all over again.
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