Household Size and Bankruptcy
What constitutes a household in a bankruptcy? Are their certain people that live with you that don’t count? Why does this even matter? This blog will briefly address the different types of household occupants and how they fit into your filing. There are actually no clear cut rules for this, so if you are unsure, please consult your attorney.
1. Yourself – This is the one person you can always be sure counts! Unlike taxes, you cannot claim less than 1 person and with bankruptcy you wouldn’t want that to be an option.
2. Your Spouse – If you and your spouse are living together and share financial responsibilities, then he or she counts in the household even if he or she is not filing with you. If you are separated and maintaining separate households, he or she will only count if they are filing with you.
3. Minor/Underage Children – If you have minor children living in your house then they count as part of the household. Please note that if you are separated or divorced and receive child support, you have to report this as income.
4. Children over 18 – Children that are of age but still living at home can be tricky. Normally, if you still provide for them financially (at least 50% of their expenses) and/or if you claim them on your taxes, most courts will allow them to be counted in your household size.
5. Parents/Other Relatives – If you are supporting your parents or other relatives, the same guidelines should be followed as with children over 18. Be careful though! If they receive a pension or retirement check, this will have to be reported as income. Social Security has to be reported but will not count in your means test or when comparing your income and expenses (for more information on the means test see our blog)
6. Fiance/Finacee/Common Law Spouse – If you are engaged to be married or (in states that have Common Law Marriage) or Common Law married, then you are implying that you intend on maintaining one household. Usually courts will allow you to count them in your household. Always speak with your attorney about filing if you wish to file with them.
7. Roommates – Most of the time, courts do not allow roommates to be counted as part of the household since they usually pay their own bills and expenses.
Why does household size even matter in a bankruptcy? In order to qualify for a straight Chapter 7 bankruptcy, you have to prove that you cannot afford to pay your unsecured debts. So your income has to be equal to or less than your expenses. And since a larger household has more expenses normally, they are allowed a larger income. There are certain limits for some expenses and if you go over that limit, you have to provide a good reason why you feel you can go over that limit.
The Lam Law Firm can help you through your bankruptcy. We offer a personal and compassionate experience during this stressful time. Contact us for a free consultation.
DISCLAIMER: The information contained on this page is for general information, only. It is not intended to be legal advice, nor should you make legal decisions based on this information. Please consult one of our attorneys to see how the law applies to your particular situation.