Most individual debtors filing for Chapter 7 bankruptcy in Birmingham, AL are required to complete a version of Bankruptcy Form 22A-2, also known as Chapter 7 Means Test Calculation. This form requires the Chapter 7 debtor to input their income over the six month period ending the month before the Chapter 7 bankruptcy petition is filed. The debtor’s average monthly income is then compared to the median income of the State of Alabama for a household the same size as the debtor’s. If the Chapter 7 debtor’s income is below the median, there is no presumption of abuse. However, if the Chapter 7 debtor’s income is above the median, there is a presumption of abuse that must be overcome by demonstrating the debtor’s necessary monthly expenses are in excess of the debtor’s income.
The information regarding median income is published by the Census Bureau according to State and family size, and the data is updated each year. In addition, the data may be further adjusted early each calendar year based upon the Consumer Price Index for All Urban Consumers (CPI).
For the first time in almost two years, the Alabama median household income has fallen for every household size except for those with four or more members. Not since November 15, 2013 have Alabama Chapter 7 filers had their eligibility requirements tightened. Prior to November 1, 2015 a the median household income for family of one was $42,041, a family of two was $50,614, and family of three was $56,186. After November 1, 2015 the median income fell to $41,420 for family of one, $49,796 for a family of two, and $53,991 for a family of three.
The result of this is that overnight some Alabama debtors may no longer be eligible to file for relief under Chapter 7 of the Bankruptcy code. Many debtors considering filing for Chapter 7 consider putting off their filing to save up money for the fees or see if they are able to get their finances back on track. However, if you’re considering filing Chapter 7 Bankruptcy in Birmingham, AL, you should be aware that the Census Bureau has updated the median income 4 times in 2015. If your income is close to the median, you may lose your eligibility to file if the median income used for the means test is lowered again.