Means Test and Household Size

As discussed more on my website, the starting point for the means test analysis is determining whether the debtor is above the median income for the state. The median income depends on the household size of the debtor.

The question is how do you determine the household size for the means test? A recent case summarized case law on the three approaches to determining household size. In re Morrison, 2011 Bankr. Lexis 103(Bankr. M.D. N.C. 2011). Several cases had used the “heads on beds” approach, which counts everyone physically residing in the debtor’s premises. A second approach is to only use individuals who could be dependents on a federal tax return. The court concluded that the first approach was too broad and the last approach was too narrow.

The court used the”economic unit” approach. Thus 2 roommates who are just sharing rent are really 2 separate households for means test purposes. But an unmarried couple with joint bank accounts sharing income and expenses would be a household of 2.

Which approach is best for a debtor? This depends on a case by case basis. If we include more members living in the same premises as part of the same household, the median income figure goes up and the allowed expenses also increase. However, then both incomes must be included.

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