Household size question

[Morgon64]

Ex husband and I "divorced" (common law style) and simply split everything as fairly as we could. Kids about half and half, too, in the sense that we each have them approx half the time. There were 4, so we each claimed two for tax purposes.

Two kids are now out of the house. Of the last two, one just moved in with me full time. The other is still half here and half over there. Thing is, the half time one is one of my tax "claimees". The one that just moved in wasn't, but obviously will be next year.

So, I have a household of 3.5. There is no box for that. I have more expenses than a household of 4, obviously. Is this just one of those "too bad, you don't fall into any catagory so we'll give you the least credit" type of things?

[JeffWerth]

I just wrote on this a moment ago, so this is largely copying what I shared earlier. Basically, keep in mind that “household” is not a term defined in the Bankruptcy Code.

The Debtor Usually Benefits from Having a Large Household. Generally, the more individuals who live in the household, the easier it is for the debtor to qualify for Chapter 7. This is because a debtor qualifies for Chapter 7 if his household income is below the state median for income of a family of the same size. Thus, the more family (or household) members, then the greater the state median income for a family of that size, and the greater the likelihood that the debtor will qualify.

Sometimes a Large Household Can Work Against the Debtor. If the debtor is required to include a certain individual as a household member who had a relatively large income, that could have the effect of skewing the means test result and preventing the debtor from being automatically eligible for Chapter 7.

There Is Little Caselaw Analyzing Who is a Member of the Debtor’s Household. It appears that this issue has not been litigated extensively and there do not seem to be any decisions from this jurisdiction as of yet. Nevertheless some courts have addressed the issue. Some of the reported decisions make a distinction between the definitions of “household” and “family,” and which concept best applies to the means test despite the fact that the statute specifies “household” size.

When is Household Size Determined? One very recent Chapter 7 case from Minnesota, In re Ellringer, (official cite not yet available), held that the determination is to be made as of the petition date. However, a Kansas court, in the Chapter 13 case of In re Anderson, 367 B.R. 727, held the appropriate date to be the date of confirmation. It is likely that this analysis would hold up in our jurisdiction.

What Exactly is the Debtor’s Household? The Ellringer court looked at the definition used by the U.S. Census bureau because certain variables used in the means test are obtained from Census data. The court felt that the Census Bureau provided the most appropriate definition of “household” for use in the means test because this ensured that a household in the means test would have the same number of members as households used in the calculation of median family income for the purpose of the Census. The court also pointed out that Congress could have specified “family” size, rather than “household” size, but did not.

Census Bureau Definition of “Household.” The Census Bureau defined “household” as follows: A household consists of all the people who occupy a housing unit. A house, an apartment or other group of rooms, or a single room, is regarded as a housing unit when it is occupied or intended for occupancy as separate living quarters; that is, when the occupants do not live and eat with any other persons in the structure and there is direct access from the outside or through a common hall.

The definition continues: A household includes the related family members and all the unrelated people, if any, such as lodgers, foster children, wards, or employees who share the housing unit. A person living alone in a housing unit, or a group of unrelated people sharing a housing unit such as partners or roomers, is also counted as a household. The count of household excludes group quarters. There are two major categories of households, “family” and “nonfamily.”

However, as you can see, the above definition is overly broad. Some Courts have rejected this approach and rightfully so. How can you include the income from a boarder as part of a family budget? The court in In Re Jewel, 365 B.R. 796, rejected the “heads on beds” approach as overly broad and instead adopted a definition limited to those household members financially dependent of the debtor. Accordingly, the best guidance to consider is whether the household members constitute a single economic unit. If they do, you should probably include them.

The Roommate Dilemma. When do you include non-family members such a roommates in the debtor’s household? This is one of the most common issues I see. Since a roommate is only involved in the debtor’s economic unit to the extent of contributing towards expenses, my suggestion is to not include the roommate as a member of the household, but to include the roommate’s contribution to the debtor’s household budget. On the other hand, if the roommate and the debtor are cohabiting as a family unit, that changes the picture.

Can You Overcome Unrealistic Means Test Results Caused by Income From Too Many Household Members? Remember that even if the debtor “fails” the means test by giving rise to a presumption of abuse, it is still up to the U.S. Trustee or interested party to object. Even if that happens, the debtor is still entitled to have a hearing before a judge who will decide the issue.

Conclusion. Use good faith, reasonableness and common sense in determining whether household members constitute a singe economic unit with the debtor, and be prepared to support your position should the U.S. Trustee inquire.

Hopefully that information gives you additional insight as to how to proceed.

Regards,
Jeff