Income Guidelines for Filing Bankruptcy in California
When you file bankruptcy in California, income plays an important role. To qualify for Chapter 7 bankruptcy, you must compute your current monthly income and compare it to the California median. Additionally, you must determine the amount of disposable income you have available every month. If either of these figures is too high, Chapter 7 may not be an option for you.
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Computation of Current Monthly Income
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The term "current monthly income" refers to the income you must use to qualify for Chapter 7 bankruptcy in California. This can be computed on Bankruptcy Form 22A. Enter the average monthly income you received from all sources for the past six months to arrive at your current monthly income.
California Median Incomes
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Once you have your current monthly income, you must multiply this figure by 12 to arrive at your annualized monthly income. Consult the most recent data on the California median income by family size from the U.S. Census Bureau. You can find this information on the U.S. Trustee website. Compare your annualized monthly income to the appropriate California median income for a family of your size. You need an income lower than this median to qualify for Chapter 7 filing.
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Disposable Income
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In addition to your annual income, your disposable income plays a role in filing bankruptcy in California. If you have a higher-than-median California income, you must complete the rest of Bankruptcy Form 22A. You may still qualify for Chapter 7 bankruptcy if you have sufficient allowable expenses to reduce your monthly disposable income. The expenses you can claim are a combination of national and regional norms, so the county you live in can play an important part in the level of expenses you can claim. Form 22A lists the limit for the amount of disposable income you can have and still qualify for Chapter 7. This amount changes regularly, so it is important to use the most recent version of Form 22A. You can get a copy of all bankruptcy forms on the U.S. Courts website.
Chapter 13 Bankruptcy
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Chapter 13 bankruptcy has no income qualification tests, so if your income is too high to file a Chapter 7 in California you can usually still file Chapter 13. The only thing that will generally prevent you from filing Chapter 13 is if you have a substantial amount of debt.
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