Each chapter within the bankruptcy code offers advantages for specific individuals or entities. Chapter 7 can provide the debtor with a blank canvas on which to draw a financial future. Under this fresh start, a trustee, first, sells assets and returns to the debtor any amount exempted, e.g. alimony, child support and student loans. Second, the trustee distributes money collected to creditors.
What is household income?
In order to be eligible to file for bankruptcy under Chapter 7, all debtors must pass a means test. The test measures a family’s household income over a six-month period against the median household income for a similar-sized household in a similar time frame.
If your household income below the median income threshold, the court presumes that you have satisfied the means test.
The Illinois bankruptcy median test calls upon filers to calculate an average of their monthly income over the previous six months. Once they have an average monthly income, they multiply it by 12 to calculate their annual income. They then judge their annual income against the state median income for a household of their size.
What is the median?
For a one-person household the Illinois median annual income is $47,536. For a four-person household, the median income is $81,680.
If a filer has an annual income that is lower than the Illinois median annual income for a household of their size, they don’t need to go through the means test. If their income is greater than the median, they must go through further steps.
Bankruptcy affords benefits, but the law does not permit all who have encountered financial pitfalls the ability to begin again. The Illinois means test can involve complex calculations that require an attention to detail. Attorneys who have a knowledge and understanding of the financial and emotional strain placed on those seeking bankruptcy relief under Chapter 7 can help.