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The rules for declaring personal bankruptcy are established by the
U.S. Legislature. As a matter of federal law, these rules are consistent
across the country, or so it seemed, until the means testing requirement
became effective. Nationally, average real median income for 2004 was
$44,389 according to the U.S. Census Bureau.
The initial means testing requirement is based upon a comparison of
income received to the annual median rate for each person's state of
residency. Each state income median is different, which creates
significant flux in the test measure, and consequently, large variations
in persons who are now entitled to file Chapter 7 based on state
residency.
Limitations On Declaring Personal Bankruptcy
A decision in favor of declaring personal bankruptcy may be based on
chapters available and time required to receive a discharge. The period
for the income comparison is 6 months, so that the average income earned
by an individual over the last 6 months, multiplied by 12, determines
the annual rate which is then compared to the state annual rate. If
personal income is below the state annual median rate, individuals are
presumably permitted to file Chapter 7 cases.
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