“I Won’t Qualify for Bankruptcy; I Make Too Much Money.”

Friday 5th of October 2012 01:24:34 AM

One of the biggest misconceptions held by people with a steady income is that they won’t qualify for bankruptcy.  Nothing could be further from the truth.  The short answer to this concern is that it doesn’t matter how much money you make; what matters is how much debt you are going to be able to discharge.

Let me explain this.  First, if someone has told you that you make too much money to qualify for a chapter seven bankruptcy, ask them if they have taken a look at your expenses.  True, there is a median income for your geographic area.  If you make less that median income then you will AUTOMATICALLY qualify for Chapter 7.  This does not mean that all is lost if you are over the median income, it simply means that the test goes to the second step; reviewing your expenses.  A bankruptcy attorney should review your expenses to see if you will qualify.  If someone tells you that you don’t qualify because you make more money then the median income and they have not reviewed your expenses, then run the other way because they are not qualified to assist you with a bankruptcy.

Second, if you still do not qualify for a 7, you might qualify for a 13.  There is no income limit in a 13, and there are in fact many benefits to a 13 which are only available in a 13. The only difference that your income will make in your 13 bankruptcy is in determining how much unsecured debt you will have to pay back. 

How much?  10%, 20%, 50%, 100%?  That question can only be answered once an office has thoroughly reviewed your income, debts and assets.  Our office has handled 13 plans which pay back NONE of the unsecured debt (usually credit cards) and have also handled 13 plans where clients have paid back ALL of the unsecured debt, and every scenario in between.

If you did in fact have steady income and couldn’t eliminate all of your debt, wouldn’t you want the chance to at least eliminate SOME of it?

Why would anyone want to file bankruptcy if they must pay back all of their debt?  There are several good reasons.  Keep in mind that a 100% plan is the usually the last bankruptcyoption available to a debtor.  The debtor may still find it better than not filing, because it gives them a better repayment plan than their creditors would otherwise offer them.  Example?  Debtor can keep their home and make payments toward the arrears of a mortgage loan instead of face a foreclosure.  Debtor can repay debts over the course of 5 years.  Debtors can strip junior liens from homes, making it easier to possibly sell or refinance their home should such an opportunity arise.  Debtors can reduce the principal balance on SOME auto loans.  Debtors AND THEIR SPOUSES can enjoy the protection of a stay against collection for the term of their repayment plan (up to 5 years).  All of these advantages may not have existed for the debtor prior to filing for bankruptcy.

If you are having debt concerns and want to know if bankruptcy is an option for you, finding out is free.

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