Recently I joined the Bankruptcy listserve maintained by author and webmaster Morgan King, and a piece on the means test caught my eye. In the discussion he focused on household or family size, which determines whether you can file Chapter 7 liquidation or must enter into a Chapter 13 reorganization. Of course the $64.00 question is whether we count family members or people living under the same roof to set the applicable median income? Mr. King’s thoughts, excerpted by permission, are as follows (emphasis added by me):
… the more people who can be counted … the more likely it is the debtor”s income will fall below the median. It is likely that a household will have more people in it than a family; household includes anyone living under the same roof whether related by blood or marriage, or not, and could include distant relatives, sub-lessees, friends, and the like … the US Trustee [takes the] position that only individuals in a family unit as defined by the IRS can be counted … meaning blood relations or dependents. See US Trustee Median Income Table (omitting the word “household”) and Census Bureau website (using the term “household population”).
Mr. King disagrees with the U.S. Trustee. He says the Bankruptcy Code is clear enough in §707(b)(6) and (7) (using the term “household median income”) and §101(39A) (defining “median family income” by reference to US Census Bureau data) that we need look no further: all members of a single household should be counted to determine the proper standard of income to be applied to a debtor. But the cases are divided, so expect a patchwork of decisions to develop on a District by District, Court by Court, and case by case basis. This means that every debtor and debtor’s Attorney is on their own to decipher local rules, custom, and practice.
Are you a Debtor, Debtor”s Attorney, or Case Trustee frustrated by the BAPCPA”s confusing standards and often awkward results? You are not alone. Learn more about the new bankruptcy law at M. Hedayat & Associates, P.C. or e-mail me at email@example.com to tell your story. All contacts are confidential.