Does the size of the debtor’s household matter in his bankruptcy? Indeed, it does. The bigger the size of the household the more deductions allowed in the means test. The more deductions allowed translates to less disposable income. If there is no disposable income, debtor can file for Chapter 7, discharge all his debts, and if he has the right exemptions, he will keep all his properties. He does not have to pay any of his debts yet keep all his properties. If he has some disposable income, he can file a Chapter 13 and his plan payment will be less instead of more, because of his household size. To illustrate, if the debtor were single and had no dependents, lived in California and had gross income of $50,000, just these facts alone would put him over the median income in California for single debtors without dependents of $48,000. In a Chapter 13, he would have to pay into a 60 months plan, instead of 36 months. On the other hand, if he had one dependent, making his household size two, his gross income of $50,000 would place him below median for a household of two, and he would not even have to fill out the complete means test in a Chapter 7. In a Chapter 13, he would qualify for 36 months, instead of 60 months! So, household size is a big deal in bankruptcy.

The problem is that the Bankruptcy code does not define ‘Household’. When words in a statute are not defined, courts will give them their ordinary and common meaning. In re Johnson, the number of people participating in the debtor’s economic unit determines the size of a Chapter 13 debtor’s household for the purposes of establishing the applicable commitment period and the appropriate measure of the debtor’s expense deductions. When the economic unit includes part time members, then those part time members should be assigned fractional memberships in the unit. “The Census Bureau’s ‘heads-on-beds’ approach is too removed from the purpose of Section 1325(b) to be an appropriate measure of a debtor’s ‘household’ size. We further conclude that there are significant concerns with the income tax dependent method and the bankruptcy court here was correct not to rely on that approach in this case. Because Congress’ intent will most often be best implemented through a definition of ‘household’ that is based on whether individuals operate as a single economic unit and are financially interdependent, we conclude the bankruptcy court did not err in applying this method to determine the debtor’s ‘household size’”, said the 4th Circuit Court of Appeals.