By James Jennings
How do you determine your household size when calculating a Chapter 7 Means Test?
There seems to be a lot of confusion on this subject. This is probably because there is a lot of deferring opinions on how this is determine and what method your jurisdiction is using at the time you file.
Let’s look at some of these methods that have been used to determine household size. There are three methods that are popular: Heads-On-Beds, Income Tax Dependent, and Economic Unit.
The “heads-on-beds” approach follows the Census Bureau’s definition of a household which includes everyone who lives in your house. Because the heads-on-beds approach doesn’t take into account financial contributions or relationships between household members, most courts believe that it’s too broad and inaccurately inflates household size. As a result, only a minority of courts use this approach.
Income Tax Dependent Approach
When determining household size, some courts only allow debtors to count individuals they can claim as dependents on their tax return. In general, this is the most restrictive approach because it doesn’t allow debtors to claim a person who lives in their house unless they can include him or her on their tax return as a dependent.
Economic Unit Approach
Many courts use the economic unit approach when figuring out household size on the bankruptcy means test. This method essentially looks at how many people in your household act as a single economic unit. The economic unit approach generally allows debtors to count any individuals living in their home they financially support, depend on, or whose finances are closely intermingled with their own.
Also, it is important to note, the 4th Circuit Court of Appeals approved a fractional approach based on the amount of time children live with the debtor. In that case, the court divided the number of days each child lived in the debtor’s house during the year by 365 to come up with a fraction. The court then added the fractions for each of the children to calculate the debtor’s household size.
If you’re still confused don’t feel bad, there seems to be a lot of that going around. Ultimately if the Trustee objects to your household size then it will be up to the judge to determine if you qualify for a Chapter 7. Only he or she can make the final determination.
As Dodge said in Frank Beddor’s Seeing Redd, “I think I speak for all of us when I say, ‘Huh?'”
If you have any questions regarding a specific legal matter or legal strategy you should contact an attorney for legal advice. If you would like to get started on a family law or bankruptcy case call us today, 602-896-9020, email us at firstname.lastname@example.org, or visit our website at DiscountDivorcePro.com.