Chapter 7 relief is not necessarily denied to a debtor just because their income is above the median income for their state. Such debtors might still qualify for Chapter 7 relief, but they will need to complete the seven page long form instead of completing the single page short form.
The long form contains a series of deductions that are based on national and local IRS standards as well as certain deductions that are specific to the debtor.
National deductions:
• Food, clothing, other items
• Out-of-pocket health care
Local deductions:
• Housing and utilities, non- mortgage expenses and rent
• Transportation, ownership costs such as maintenance and fuel
Needs-based deductions:
• Taxes
• Court ordered payments
• Union dues
• Life insurance
• Childcare
Secured debt deductions:
• Mortgage payments
• Car loans
• Amounts needed to cure arrears on secured debt
IRS national and local deductions are available at http://www.usdoj.gov/ust/
The long form is used to ascertain a debtor’s net disposable income. This figure is determined by subtracting the permitted deductions from the debtor’s gross annual income. After completing this analysis, an above median income debtor may still qualify for Chapter 7 if monthly net disposable income x 60 months is less than:
(a) 25% of the debtor’s non-priority unsecured claims in the case, or $7,025, whichever is greater; or
(b) $11,725