Chapter 7 Bankruptcy and the High Income Debtor
Most people believe that a high income will prevent them from filing Chapter 7 Bankruptcy. This presumption is not always true. A number of factors determine whether your income is too high, or even relevant, to your eligibility to file Chapter 7.
Nature of your Debts
The debtor’s income level is initially important under the means test. However, the means test is only applicable to “consumer debtors”. If the majority of your debts, by amount, are non-consumer debts, the means test does not apply to you. Examples of non-consumer debt include business debt, medical bills and taxes. Talk to our experienced bankruptcy attorney about the nature of your debts.
The income limit for Chapter 7 is based on your state median income for a family your size. Currently in Oklahoma, s single person household earning $50,000.00 may not qualify to file Chapter 7. However, a family of 7 can earn up to $93,498.00 under the means test. With respect to your family size, it may be larger than you think. Talk to our experienced bankruptcy attorney to determine the median income applicable to your case.
Type and Timing of Income
Some types of income are not included under the means test. These include payments under the Social Security Act, payments for victims of terrorism or war crimes. While these latter 2 exclusions won’t apply to many, the exclusion of payments under the Social Security Act could enable you to file for Chapter 7 protection. Likewise, if you have a suffered a loss or drop-off in your earnings, your past income may not impact the means test. The test looks to your income only over the past 6 months from the date you file.
Types and Amounts of Debts
Even if you are subject to the means test and earn above your state’s median income for a family your size, Chapter 7 protection may still be available to you. At that point, it is important to look at the type and amount of your expenses. If you have a large mortgage, hefty car payments, a large family, tax arrears, out of the ordinary medical bills, your high income may still allow you to pass the means test. It is important to discuss the type and amount of all of your debts with an experienced bankruptcy attorney.
Before you presume yourself unqualified for Chapter 7 protection, take the time to speak to an experienced bankruptcy attorney about your circumstances. Chapter 7 is not appropriate or available to everyone, even some who pass the means test but still have sufficient income to pay something to their unsecured creditors. We can advise you what course is right for you. Call us today. We are here to help!
(We are a debt relief agency and we help people file for bankruptcy relief under the Bankruptcy Code.)