Determining Household Size for Means Test

20 May Determining Household Size for Means Test

The means test is a key feature of the 2005 BAPCPA bankruptcy amendments. It incorporates state median income figures to determine who should pay back some of their debts in a Chapter 13 plan. Median income is on a sliding scale based on family size. Consequently, the more people one can claim as household members, the higher the median income, and the easier it is to “pass” the means test (or reduce and/or shorten the required Chapter 13 payment).

There is controversy regarding who should be counted as a household member under some circumstances. The Internal Revenue Manual and the Census Bureau definitions differ on the concept of family size. Some courts have adopted the Census Bureau definition described by some as a “heads on beds” definition: namely, that anyone actually sleeping and eating in the house is a household member.

Other courts have taken a view more consistent with the stricter IRS definition requiring some support of the purported household member by the debtor. In these cases, adult children with jobs living in the house have been disallowed as family members. See, e.g., In re Jewell, 365 B.R. 796 (Bankr.S.D.Ohio 2007).
It is important to consult with experienced legal counsel on this issue. However, in general, when a person has been actually living in the debtor’s home for the six months prior to filing and has been supported, at least in part, by the debtor, there will be little controversy in counting that person towards the household size, even if the person in unrelated to the debtor.

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