What Is the Income Limit for Filing Chapter 7 in Florida?

What is the income limit for filing Chapter 7 in Florida? The median income level for Florida families has increased as of April 1, 2023. This is generally good news for those seeking debt relief because it makes it easier for them to qualify for Chapter 7 liquidation bankruptcy.

The United States Trustee Program uses these median income levels to decide if an individual can get relief under Chapter 7 of the Bankruptcy Code. It’s also used to figure out the commitment period for payment plans filed in Chapter 13 bankruptcy. If you’re thinking about filing for Chapter 7 or 13 bankruptcy in Florida, it’s a good idea to reach out to a bankruptcy lawyer like Robert Bruner right away. Attorney Bruner offers free consultations on bankruptcy matters.

This data is based on the Consumer Price Index for All Urban Consumers and is collected by the United States Census Bureau. It’s regularly updated. Keep in mind that household income is only one factor to be taken into consideration when assessing if you qualify for Chapter 7 relief. An experienced Florida bankruptcy attorney must examine all aspects of your financial life to come to this conclusion.

Florida Median Income Test

Median Income Figures for Bankruptcy Means Testing
	1 Earner	2 People	3 People	4 People*
Florida	$60,429	$74,131	$83,396	$100,476
*Add $9,900 for each individual in excess of 4.

Filing for Chapter 7 bankruptcy may not be viable if your income exceeds certain limits, so to figure this out we need to refer back to bankruptcy law for guidance on what constitutes median household income. We’ll explore it further below in more depth.

What Is Median Income?

The Department of Justice utilizes Census Bureau data to provide bankruptcy courts with the median incomes of households of different sizes in each state. Imagine making a list of all household incomes in Florida from zero dollars up to millionaire status. Finding that middle point between all this income – that’s their median income!

As of November 2017, Florida had a median income for two-person households of $56,759. This number is updated twice annually.

How to Calculate Household Size and Income

Step one in determining household income is to ascertain its size – usually, this means the number of residents living in your home. Keep in mind that roommates who share rent equally would still be considered two separate households for our example calculation purposes, so their gross incomes (before taxes) would need to be combined in order to arrive at total household income.

Now, the exact rule is this: add up all the gross incomes for each household member over the past six months (excluding the current month, as it’s not complete). Don’t count Social Security (and there’s some uncertainty about whether Unemployment Compensation should be included), but do include child support, alimony, and other income. Double that figure for an annual estimate using your current income rate for the past six months. Congress prefers this recent income snapshot over the past year to predict future income.

Comparing Your Income

Compare your annual household income with the median income for your household size. If it falls below this median amount, Chapter 7 could likely be an option. However, if it exceeds this limit, other tests must be explored in order to potentially qualify for bankruptcy protection under Chapter 7.

In essence, this median income test plays an integral role in assessing eligibility for Chapter 7 bankruptcy based on your income level.

The Means Test: Assessing Your Ability to Repay Debts

The next test is called the means test. It figures out how much money you can afford to pay your creditors each month while still having enough for your basic living costs. The “Median income” and “Means Test” are similar, but they’re actually different. In the first test, we only asked for your median income, not your personal circumstances. But in the means test, we’re more interested in your personal situation and monthly expenses. We want to know if you can manage to pay back some of your debts.

What the Means Test Examines

During the means test, we’ll ask you about things like expected high medical costs, your mortgage payment, car payments, and other monthly financial commitments. We also need to know if you’re paying child support or alimony, or if you have childcare expenses. The court will create a budget that’s customized to your situation. This budget includes some real-life numbers like your child support and medical expenses. But it also includes set amounts for certain expenses, like groceries, based on guidelines from the Department of Justice. These set amounts can vary depending on where you live in Florida, like the region or county. The budget is designed to cover your basic needs without any extras like vacations or savings.

Evaluating Your Ability to Repay Debts

The court then compares your income with this budget to see if you have enough money to cover your budget and make meaningful payments to your creditors. In some cases, your income might be less than the proposed budget. In this situation, you won’t have any extra money to pay creditors. If you don’t pass the median income test, you can still file for Chapter 7 bankruptcy, even if your income is lower than the budget. You might have enough to pay your bills and have a bit left over for your creditors. But if you do have enough income to cover the budget, you can’t file for Chapter 7, and your only option is Chapter 13 bankruptcy.

To sum it up, the court will figure out your monthly necessary expenses, or the amount you need to get by. Then it subtracts your monthly necessary expenses from your income to determine if you can afford to pay your creditors each month. If the answer is no, you can file for Chapter 7 bankruptcy. If the answer is yes, you can’t file for Chapter 7, and Chapter 13 is your only option.

Florida Business Debt Exemption

There’s an important aspect that can affect your bankruptcy options, and it’s known as the “primarily non-consumer” debt rule. This rule can override the median income and means testing requirements. You can file for Chapter 7 bankruptcy regardless of whether your debts are mainly for personal or business purposes. Now, let’s break this down in simpler terms.

Understanding Debt Categories

First, it’s helpful to think of your debts in two categories: “business debt” and “personal debt.” Instead of using the terms “consumer” and “non-consumer,” this approach can make things clearer. But here’s the twist: some debts you might consider personal, like IRS income tax liabilities, are actually classified as “non-consumer debts.” This complicates the distinction between business and personal debts.

Here’s the bottom line: the court will examine whether more than half of your debts fall into the “non-consumer” category. If they do, you can file for Chapter 7 bankruptcy, no matter the results of the means test or median income test.

Since 2016, bankruptcy cases where debtors claim most of their debts are non-consumer (business) debts face extra scrutiny. This scrutiny comes from the Department of Justice’s Assistant U.S. Trustee. To handle this, you and your bankruptcy attorney will need to investigate your debts thoroughly before making the claim that your debts are primarily business-related. At Bruner Wright, we have extensive experience in handling such cases. We use spreadsheets to compare your business and non-business debts. If challenged by the Assistant U.S. Attorney, our Jacksonville bankruptcy attorneys are prepared to defend your position.

Chapter 7 or Chapter 13?

Most people who file for bankruptcy prefer Chapter 7 for several reasons:

Debt Forgiveness: You’re not required to pay back your debts, which provides relief from financial burdens.
Quick Resolution: Your case typically wraps up in less than 4 months, allowing you to move forward swiftly.
Debt Discharge: You can eliminate most debts, excluding certain exceptions like student loans or debts you wish to keep, such as your home mortgage.
Cost-Effective: It’s the least expensive option when it comes to attorney’s fees.

On the other hand, Chapter 13 bankruptcy offers its own set of advantages:

Foreclosure Prevention: You can halt foreclosure and catch up on missed mortgage payments, helping you keep your home.
Second Mortgage Adjustment: If there’s no equity in your second mortgage, you may be able to remove it.
Asset Preservation: You can retain specific valuable possessions instead of surrendering them to a trustee.

Bruner Wright P.A.’s Jacksonville bankruptcy attorneys provide a free consultation to determine which bankruptcy chapter best suits your unique situation. With over 35 years of combined experience and extensive knowledge, they are here to assist you during this challenging period.

What Is the Income Limit for Filing Chapter 7 in Florida?