One must earn below the state gross median income in order to presumptively qualify to file a chapter 7 bankruptcy. Presumption implies that the burden is upon the opposition to prove otherwise. For debtors without substantial assets, chapter 7 is usually superior to the other common consumer option, chapter 13. A 7 cancels unsecured debt outright; it's cheap; it's fast. A chapter 13 requires you enter into a repayment plan; it's expensive; it's slow.

Thing is, the median income figures adjust for household size. If you are married, your community income (in CA) needs to be below $65K in order to presumptively qualify for ch 7. If you have 2 children, you can earn almost $80K and still presumptively qualify for ch 7. Relatively more than IRS deductions, bankruptcy favors a large family. If you are single and living alone and your income tops just $49,182, the burden shifts to you to establish ch 7 eligibility: you need to pass a means test to see if you have the means to pay back your debt in a chapter 13 plan. You must demonstrate that after objective expenses are deducted from income, you'd have insufficient income to enter into any meaningful payment plan.

Example. Desmond marries Molly, a singer in a band. Soon after marriage, they carry the onus of considerable consumer debt. Though the market place is weak, Molly's band gets plenty of well-paying gigs. Their $75K community income far exceeds the median for a 2-person household. It will be hard for the couple to presently qualify for a chapter 7.

2 years pass. Desmond and Molly now have a couple of kids running in the yard. But kids aren't cheap and their debt is higher than ever. Income remains $75K, but now the couple is presumptively eligible to file a chapter 7. They can have a sweeter home, sweet home.