When you are applying for Chapter 7 or Chapter 13 Bankruptcy, you will need to take some tests to determine your eligibility.  One of these tests is something called a “median income test.”

What You Need

This test measures your household income and size against the median income for your region.  You will need to use your pay stubs and taxable income from the past six months to determine your average monthly income.  The six month period in question is six months before the end of the month preceding your filing (If you file on December 16th, the period runs from June through November).

In addition to your income information for the six-month period, you will need to include any tax refunds or end of year bonuses, since they are considered income by bankruptcy law.  Depending on your situation, you may also be able to use a pro-rated approach and spread this additional “income” over a period of 12 months, if you were working.  One exception that you can use to avoid including this as income is if it was received more than six months before you filed for bankruptcy.

Additional Sources of “Income”

In addition to official income and tax refunds, you will need to include:

1)      Rental income

2)      Retirement income (with the exception of social security)

3)      Earned income credits

4)      Alimony or child support payments

5)      Insurance payments and reimbursements

6)      Inheritance or monetary gifts

7)      Scholarships or government funding for education

8)      Partnership income

9)      Net income from business assets

10)  Prizes and winnings

After the Test

It is important to remember that if your income is over the median income for your region, you will need to continue on to take the “means test” which will be used to evaluate eligibility.  Even if you are earning more than the median, you may still qualify for Chapter 7 Bankruptcy based on your unique situation.  Consult your bankruptcy lawyer for more information.