The quickest and easiest way to understand why you care about “household size” is to think about the Means Test as a budget. With the Means Test, the larger the “household size” the greater the amount of money you can set aside for living expenses. The more you get for living expenses, the less you have left over for creditors. If you have very little left over, then you increase your chances of qualifying for a Chapter 7 debt discharge. If, on the other hand, you have “too much” income left over and available for creditors, then you might not qualify for a Chapter 7; you might have to file a Chapter 13 and pay that left over money to creditors over three to five years.
Of course, there is nothing wrong with filing a Chapter 13. But, you don’t want to look like you have extra money left over to pay into a Chapter 13 if you really do not. So, choosing the correct “household size” really matters. The larger the household size, the greater the income you can make and retain for household expenses.
HOW IS A DEBTOR’S “HOUSEHOLD SIZE” DETERMINED?
The Bankruptcy Code does not tell say how a court is supposed to make that determination. As a result, courts have been left with the task to determine what Congress meant when it said “household size”.
Three basic approaches have developed: