The Long-Form Means Test: Household Size

The means test is one of the more complicated aspects of consumer bankruptcy. For people who have to take this test, “passing” is a matter of understanding each line item individually. This is lawyer work for sure, as different line items are interpreted differently by each State’s trustees and judges. This blog series is an exploration of those line items and the issues that arise around each one.

Last time, we discussed what counts as income when completing the bankruptcy means test. In this installment, we will review the guidelines for household size.

Household size is very important in making the determination of whether your gross income is “above median” or “below median” and, therefore, whether you qualify for Chapter 7 bankruptcy or what your monthly payment would be in Chapter 13 bankruptcy. (For more on the Chapter 7 vs. Chapter 13 bankruptcy see What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?) The term Household, unfortunately, is not defined in the bankruptcy code. They wouldn’t want to make things easy, right?

In most cases, household size is an easy call. For example, you have a married couple with two kids who are both claimed as dependents on the tax return. Boom, household of four. But there are many cases where the call is not so clear. An example would be a married couple with one adult daughter living with them, along with her boyfriend and their son. Hmmmm. What is the household size for the means test? Two? Four? Five?
In the absence of a clear definition in the Bankruptcy Code, courts around the country have developed a number of approaches to making this determination where the determination is not clear, like in the example above.


One approach courts have taken is called the “Heads on Beds” approach, or US Census Bureau approach. This holds that everyone living in a housing unit, related or not, is part of the household for means test purposes. This is the most liberal approach and under this approach, my example above would be a household of five, no need to look further. Easy-peasy. However, this approach seems to be falling out of favor, probably because many Trustees find it too liberal in favor of the debtors filing bankruptcy.


This is the strictest approach to household size. Under the financial dependent approach, you can only claim a household member if you also claim them as a dependent on your taxes. Therefore, in my example above, your results would change depending on the facts. Is the adult daughter working? How long has she and her child lived with her parents? Etc. Under this approach you may have a household of Two, Three or Four depending on the circumstances.


This is the approach that seems to be taking over as the courts hear more cases on this subject. It is also the winner in the only circuit court opinion on this issue, meaning it won on appeal from a lower court and is now the law of the land for the Fourth District (Maryland, North Carolina, Virginia and West Virginia). (The case is In re Johnson, 2011 WL 5902883 (Bankr. E.D. N.C., July 21, 2011).)

Under the economic unit approach, the household can consist of non-family members and unrelated individuals who could not be claimed as a dependent on a tax return, but who directly impact the person filing bankruptcy’s financial situation.

Under this approach, my example could result in a household of five, as long as any income coming into the household from the adult daughter or her boyfriend was also included in household income. Again, the determination is very fact-specific and requires an examination of all the pieces: income for each person, living arrangements, expenses.

Colorado, where I file many chapter 7 and chapter 13 bankruptcies, has yet to weigh in on the subject. However, I believe that the economic unit approach will end up the majority approach as the other two are either too broad or too strict. The worry is that if your case gets a question or objection based on household size, the court is going to look very closely at the big picture and various facts of your situation and you want to be prepared for that. The best way to be prepared is to use an experienced bankruptcy attorney and make sure you understand the issues unique to your case.