Is the Median Income for Indiana Chapter 7 Before or After Taxes?
Chapter 7 bankruptcy is usually the fastest way you can discharge your debt in a bankruptcy court, with most cases only lasting a few months. However, to get a Chapter 7 discharge in Indiana you have to qualify by demonstrating to the court that you cannot afford to pay back your creditors. The median income for the state of Indiana is the key to your qualification.
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Indiana Chapter 7 Qualification
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Before you even file your bankruptcy papers in Indiana, make sure you qualify to file under Chapter 7. Using Bankruptcy Form 22A, you can compute whether the court will allow you to file Chapter 7. The first test is a comparison between the Indiana median income and your own current monthly income as determined using formulas provided by the court. If you can show an income below the current Indiana median, you can usually qualify to file Chapter 7.
Household Size
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Following the instructions on Bankruptcy Form 22A, you can get the median income figures for Indiana from the U.S. Trustee website. The Indiana median income changes frequently, so the U.S. Census Bureau updates the data for the Trustee Program on a quarterly basis. Additionally, the Census Bureau provides median income figures based on household size. For example, as of March 15, 2011, the Indiana median income ranged from $40,135 for a one-person household up to $69,226 for a four-person household. To qualify for Chapter 7 in Indiana, you must match the appropriate household size to your own and use the corresponding median income figure.
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Gross or Net?
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The median income figures used for bankruptcy purposes are gross figures, not net. As a result, to qualify under the median income comparison you must provide your gross income figures as well. Line 3 of Bankruptcy Form 22A asks for your gross wages, tips, commission, salary, overtime and bonuses, and there is no deduction for any taxes you pay on this portion of the qualification test.
Why Gross Income?
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If you fail the median income comparison test, the bankruptcy court allows you an additional way to qualify for Chapter 7 bankruptcy in Indiana. The means test comprises the remainder of Bankruptcy Form 22A and allows you to factor in various expenses, including the taxes you pay, to arrive at a "disposable" income figure. If your disposable income is low enough, even if you exceed the Indiana state median, you may still qualify for bankruptcy.
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