When I interview new clients, some of the first questions I ask are aimed at determining gross annual household income. Why? By comparing their income to the median income for a family of their size in Washington or Oregon, we can usually determine what bankruptcy they should file. Most above-median income debtors will need to file a Chapter 13 bankruptcy and pay debt for up to five years. Most under-median income debtors can file a Chapter 7. Additional calculations come into play later when we complete the means test but median income is the starting point.
The U.S. Department of Justice publishes median income data from the Census Bureau, which it adjusts periodically: http://www.justice.gov/ust/eo/bapcpa/meanstesting.htm. While it’s hardly surprising, the median household income for families in Washington and Oregon has declined steadily in recent years. In October of 2008 the median incomes for four person families in Washington and Oregon were $79,397 and $70,046 respectively. The numbers rose to $82,716 and $72,667 in November of 2009, but income has declined since. In November of 2011 the median income for a family of four in Washington dropped to $80,404 - close to the 2008 level. In Oregon the number dropped to $66,616. It seems counter-intuitive but this decline may lead to more chapter 13 filings for middle income families whose income has stagnated in recent years.