Median Income and the Means Test: Gross Income vs. Net Income

In a consumer bankruptcy case,  a person’s gross income is used to calculate whether the debtor is above or below the median income for means test purposes.

People often confuse gross and net (or “take-home”) income, and that is understandable, because most people’s household budgets operate according to their take-home pay. However, when you are trying to determine whether your household income is above or below median income, it is determined according to your gross income – not your take-home pay.

If you have self-employment income, in order to determine your income for means test purposes, you will need to have an up-to-date profit and loss statement. It is also very important for self-employed people to keep good records and documentation (think: bank statements, receipts, etc.).

This entry was posted in Bankruptcy Law and tagged , , , , , , . Bookmark the permalink.

Leave a Reply