When things go wrong with your finances it may not matter how much income you have coming in. People of all income levels get their financial situations in a mess and a high level of pay might not mean you are immune to making mistakes. The problem is that if your income is too high you won't be able to file for a chapter 7 bankruptcy. Read on to learn more about this unfortunate situation and how you can cope with it.
Compare Your Income
The rules about income came about as a way to stop wealthy people from abusing and taking advantage of bankruptcy laws. When you fill out your bankruptcy paperwork, you will need to state your income and provide income tax returns and bank statements to prove it. If your income rises above the median income for your state of residency, you may be barred from filing for chapter 7 bankruptcy relief. Every state has a stated average income made by residents of the state. It might be high in California and low in Mississippi, but usually you cannot pick and choose which state to file for bankruptcy since there are minimum residency requirements
The Means Test
This test is part of the bankruptcy package and it looks at your most recent 6 months of income only. If your income is too high, there are certain qualifying deductions that might lower it enough for you to file. Some common expenses that can be deducted are housing, child care and medical expenses. Be sure to speak with your bankruptcy attorney about these deductions since using them could mean the difference between getting the debt relief you need and not. Since it only takes the previous 6 months into consideration, it might be possible for you to put your filing off for a few months if you have reason to believe that your income will drop and allow filling.
Go With Chapter 13
Most filers decide to use chapter 7 when filing due to the way it eliminates debts completely, but there is another option. By filing a chapter 13 bankruptcy, you need not worry about your income since there is no means test to worry about. You will instead work with your creditors to create a debt repayment plan that gives you some monthly relief and extends your time to pay your bills.
Speak to a bankruptcy lawyer about the debt relief you need, especially if it includes needing chapter 7 bankruptcy filing assistance.