What Are the Chapter 7 Bankruptcy Income Limits in Utah?

Chapter 7 bankruptcy lawyer in Utah

What Are the Chapter 7 Bankruptcy Income Limits in Utah?

In order to file for bankruptcy under Chapter 7 in Utah, you’ll need to pass the means test. Essentially, the test determines whether or not you have enough disposable income to pay your debts – and if you don’t pass, you won’t qualify for Chapter 7 bankruptcy.

Should you be worried about failing? Probably not, as most people who take the means test easily pass. However, learning about the income limits in Utah and how the test works may help to ease your concerns about eligibility for Chapter 7 bankruptcy.

Utah Median Household Income Levels

The first part of the bankruptcy means test compares your average household income for the previous six-month period to Utah households of the same size. If yours is less, you’ve passed the means test and can file for Chapter 7 bankruptcy.

The income limits change periodically, but for bankruptcy cases filed on or after May 1, 2020, the following figures apply:

  • Individuals – $64,806
  • Two-person households – $69,006
  • Three person households – $82,638
  • Four-person households — $93,474

The income limit rises by $9,000 for each additional household member. So, if you’re a family of seven, you can earn up to $120,474 and still be eligible to file for Chapter 7 bankruptcy.

How Your Expenses Can Help You Pass the Bankruptcy Means Test

If your income is greater than the current median income level for same-size households, the next step is to look at your living expenses.

You’re legally allowed to deduct certain expenses from your income, and after doing so, you may have no problem passing the bankruptcy means test. The allowable expenses include:

  • Tax obligations
  • Costs for health, disability and term life insurance
  • Secured debts like mortgage and car loan payments
  • Child support, alimony and other court-ordered payments
  • Childcare costs and money spent caring for elderly, disabled or chronically ill family members

This list is not complete. If you have other expenses that are necessary for the health and welfare of your family, an experienced bankruptcy attorney can explain the special circumstances to the satisfaction of the Utah court.

What are the Options if You Fail the Utah Bankruptcy Means Test?

If your disposable income is above the limit, even with the allowable deductions, you can choose to file for Chapter 13 bankruptcy. This approach could help you get caught up on your debts without losing your assets.

As an alternative, you could temporarily put your plans to file for bankruptcy on hold. The means test is based on your income for the six months before filing, and you might meet the threshold for Chapter 7 if you wait awhile.

For expert advice on which route to take – or for more detailed information on the bankruptcy means test — you’ll need to speak with an experienced local bankruptcy attorney. And in northern Utah, the legal team at the Law Office of Davis & Jones, P.C., has the skill, knowledge and experience to help you make a smart decision.

We’re ready to answer all of your questions about filing bankruptcy. For a free, no-obligation consultation to discuss the means test and your eligibility for Chapter 7 bankruptcy, contact the Law Office of Davis & Jones in Salt Lake City, Utah, today.