Rules Declaring Personal Bankruptcy

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.