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Pew research says middle class has shrunk in the last decade

A new study says that middle class Americans saw a significant drop in income in the last decade. The Pew Research Center says that the median household income for the typical three-person middle class American household dropped nearly $3,500 in the first decade of the 21st century. The calculations in the study were adjusted for inflation.

The researchers say that incomes have dropped since 2000. Meanwhile, in the early part of the decade, actual middle-class wealth showed modest gains. However, the researchers say that the small gains in wealth evaporated during the recession, which began in 2007.

But the researchers also say that the middle-class grew smaller during the last decade. It may surprise some to know more than half of the households that no longer are considered middle class moved up in scale during the 2000s, despite the Great Recession hitting in 2007. The Pew researchers say that about 40 percent of the households that left the middle-class during the decade moved down in household income.

People who file for bankruptcy generally learn about how the bankruptcy code uses median household income data. The bankruptcy code added what is known as the "means test" in 2005. The Pew research is not a factor in the bankruptcy code means test. The U.S. Trustees Office which oversees bankruptcy cases uses federal information to determine the median household income data for each state in the union.

People filing for bankruptcy in Ohio use only the data related to this state. Generally, a debtor whose income falls below the median household income for the state may qualify for chapter 7 bankruptcy. But the means test is more involved than looking merely at income. There is a means test formula for determining household income, which includes variations based upon family size within the household and other factors. A person considering bankruptcy can learn more about the means test from legal counsel.

Source USA Today, "Study: Middle class poorer, earned less in 2000s," Tim Mullaney, Aug. 22, 2012

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