What Are the Debt to Income Ratio Guidelines for Filing a Chapter 7 Bankruptcy in California?

Find out if you qualify for Chapter 7 bankruptcy in California.

There are no specific debt to income ratio requirements for filing a Chapter 7 bankruptcy. To qualify for a Chapter 7 in California (as well as in other states), you must pass a means test. Read on to learn more about eligibility requirements for filing a Chapter 7 bankruptcy in California.

For more information, see  The Means Test and Other Eligibility Issues in Chapter 7 Bankruptcy.

How Does the Means Test Work?

The means test compares your average gross monthly income for the six months prior to your filing date against the median state income for a similar household. If your income falls below the state median, you automatically pass and don’t have to complete the entire form. But if your income is above the median, you must fill out the expense portion of the means test to determine whether your disposable income is low enough to qualify for Chapter 7 bankruptcy.

Most deductions on the means test are based on local and national living expense standards. This means that you can’t use many of your actual expenses to qualify for a Chapter 7. But there are exceptions. If you have a mortgage, car loan, or domestic support obligation, you can typically deduct your actual monthly payments for these debts to reduce your disposable income. For many debtors with above median income, having a large mortgage payment is the key to qualifying for Chapter 7 bankruptcy.

Median Household Income in California

As discussed, if your income is below your state’s median, you automatically pass the means test. In California, the median household income for cases filed after April 1, 2016, is $50,579 for a single person with no dependents, $66,537 for a two-person household, $70,816 for a three-person household, and $81,837 for a household of four people.

However, these amounts are updated periodically. As a result, visit the U.S. Trustee's website to find out the most recent figures when you file your case.

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