Bankruptcy income eligibility got easier April 1, 2023

Income eligibility to file Chapter 7 bankruptcy in Virginia got easier April 1, 2023.  The median income–that’s the cutoff for automatic eligibility based on income–shot up six to ten thousand dollars.

The median income for a family of four increased from $124,304 to $134,252.  For a family of three, from $102,791 to $111,017.  For a one person household from $69,791 to $75,376.

Budget Eligibility Did NOT Change

The food and clothing allowance for a family of five is unchanged at $1651 per month.

Bankruptcy budget eligibility for people with higher incomes (incomes over the median) did NOT change. Families, and individuals, making more than those median incomes can often get approved for Chapter 7 bankruptcy. But only if they can show budget eligibility on a “means test.” Some parts of the means test use actual expenses, but some are based on fixed allowances.  Those fixated allowances have not changed.  (The food and clothing allowance for a family of five is unchanged at $1651 per month.) 

Usually, the budget allowances increase on either May 1 or May 15.  If your eligibility is border line, not filing until May might get your Chapter 7 case approved.  (Or get you a lower payment in Chapter 13.)

Consumers Do Have a Friendly Person in Charge

These bankruptcy eligibility numbers are published by the Office of the United States Trustee.  In February 2023, the Biden administration appointed Tara Twomey to be in charge there.  Tara was previously Executive Director of the National Consumer Bankruptcy Rights Center and Of Counsel to the National Consumer Law Center.  Over the last ten years she did as much as any lawyer in the country to help consumers get favorable decisions pm close questions of law.  

Her office needs information from the Internal Revenue Service to publish the budget numbers. But I know Tara will pressure them in every way possible to get those numbers published on time.