Do I Qualify for chapter 7 bankruptcy In Virginia?

Talk about not having any manners. You have barely sat down in my office, exchanged a few pleasantries, and then seemingly out of nowhere I ask you a very personal question: How much money do you make? Or more specifically, how much gross income have you been averaging per month for the past 6 months? Why would a bankruptcy attorney be asking you this question? Because one of the decisive factors in determining whether you qualify for a chapter 7 bankruptcy versus a chapter 13 bankruptcy is income.

You determine your income by first averaging your gross income for the past 6 months.  Then, multiply that number by 12 which will give you your median income for the year.

The next key question that I will ask you is how big is your household? Meaning, how many people live in your home. Why? Because as usual size does matter.  As in, the larger the number of people in your household the more income you are “permitted” to make and still qualify for a chapter 7 bankruptcy.

With these two key pieces of information I will then review Virginia’s state median income figures to determine where you stand. At this time (end of 2012) the figures in Virginia look as follows:

Household   Size	Income
1	$52,247.00
2	$64,593.00
3	$76,012.00
4	$89,803.00
5	$97,303.00
6	$104,803.00

What do these figures mean? It means that if you are below the median income figures as determined by your household size then you automatically qualify for a chapter 7 bankruptcy in Virginia. Conversely, if you are way above the median income figure for your household size, then in all likelihood you will only qualify for a chapter 13 bankruptcy.

Because I am fond of examples, let’s say that a husband and wife are thinking about filing for bankruptcy. They have a combined income of $75,000 per year.  They have one minor child which means that their household size is three.  Based on the chart above, either one of them –or both of them- would automatically qualify for chapter 7 bankruptcy.

As for those Virginia residents who make more than Virginia’s state median income as determined by their household size, in that case the Means Test will determine their fate. I will address the issue of “passing” the Means Test in a separate article.

So what’s with these figures and where do Virginia’s state median income figures come from?  Well, these numbers are the result of the Bankruptcy Abuse Protection and Consumer Reform Act passed by Congress in 2005.  After great pressure from the banking industry that was bemoaning the fact that people were abusing the bankruptcy laws and qualifying for bankruptcy far too easily, Congress finally caved in and passed this legislation. The main purpose of the new law was to take away the power of bankruptcy judges to make their own discretion in determining whether or not someone qualified for chapter 7 bankruptcy. Now –in theory at least- it is just a matter of dollar and cents.

And finally yes, your observation is correct, each state in the United States has its own state median figures that are adjusted slightly each year.  And for once, the fact that you live in Virginia is actually helpful. Congress, when it enacted the new law in 2005 understood that where you live is just as important as how much you make.  $50,000 in Northern Virginia is not going to take you as far, as say someone living in West Virginia.  Congress is essentially giving you credit for living in a more expensive area and adjusting its figures accordingly.

So yes, call it money, mullah, scratch, the green stuff, whatever…When it comes to bankruptcy, the saying is true “It’s all about the Benjamins.”