A dependent is defined as “someone who relies on another for support; one not able to exist or sustain oneself without the power or aid of someone else.” This definition matters quite a bit if you are considering filing for bankruptcy. Times have been rather tough for some Americans as the economy has hit a bid of a downward spiral. People have lost jobs, which have led to foreclosures, which has led to many adult children returning home. So, if they are grown adults can they still be considered dependents?
Whether or not a person is defined as a dependent can mean the difference between their parents filing a Chapter 7 or a Chapter 13 bankruptcy. For example, the median income for a family size of 2 is about $52,000, but it increases to about $59,000 if that family has 3 people. If debtors are over that median income, then they will be unable to file a Chapter 7 and will have to discuss their options regarding a Chapter 13. So, if a married couple has an adjusted gross income of $55,000 they would be over median if they could not include their unemployed, 23 year-old daughter, who is living at home and not paying any rent, but they would be under median if they can include her in their household size.
This can also make a difference if a debtor is in a Chapter 13 and they are forced to pay back money to unsecured creditors. They will have less disposable income if they are able to list a dependent child, and therefore, will have to pay back less money over their 60 month plan to unsecured creditors. Sometimes, having a dependent would push them under median and either allow them to file a Chapter 7 or enable them to complete their Chapter 13 plan early and not pay back any money to unsecured creditors at all.
No circuit court has addressed whether the term “dependent” requires a legal or familial relationship. A case-by case analysis is necessary to determine the length of time the claimed dependents have resided in the household, the reason the claimed dependents are residing in the household, and whether it was necessary for them to be living there.
As stated above it is clear that the law is ambiguous in regards to what the court will define as a dependent. If you are interested in speaking with an attorney about this article or another issue that is related to bankruptcy, our office offers free consultations at six different locations in the St. Louis area. Please contact us today if you have questions or feel bankruptcy may be a good option for you.