Person Earning Above Average Income Filing Chapter 7 Bankruptcy

The laws for Bankruptcy eligibility made it more difficult for people who earned above average income to seek Chapter 7 Bankruptcy protection after 2005. Before 2005, the law did not set specific parameters what your income should be to be eligible for Chapter 7 Bankruptcy protection. If the client is not eligible for a Chapter 7 Bankruptcy protection due to their income and expenses requirements, they can file a Chapter 13 Bankruptcy protection.

There are two most common Bankruptcy chapters which would be a Chapter 7 and Chapter 13, which normal and every day people file. The Chapter 7 does not have a reimbursing your creditors element. Once you file a Chapter 7, you can complete the process within three to four months everything is in line with the plan and the rules are followed by you. At the end of the process, you can receive a discharge on most of your debts. The alternative solution if you do not qualify for a Chapter 7, it is a Chapter 13. Chapter 13 is not a bad solution to discharge your debts. The first test is the simplified form to pay back 100% of all disposable income after normal expenses for the 36 to 60 months payment plan period in a Chapter 13 plan. The majority of clients in a Chapter 13 have little money left over to get caught up in back car payments, mortgage, and taxes. Since there are no additional proceeds left in the plan the medical bills, credit cards, etc. receiving nothing and at the end of the Bankruptcy under Chapter 13 plan get discharged.

An individual having a high income who is seeking a Bankruptcy under Chapter 7 has to prove that her or his reasonable expenses do not permit any money left over to fund a Bankruptcy under a Chapter 13 plan. The gross income earned in the six months for the monthly average is less than the median income for the residence of that State. However, if an individual goes above the monthly median average gross income the individual is limited to employing the arbitrary monthly living expenses allowed by law to show if there is any proceeds left to pay into the plan.

The means test is the same test that the IRS uses to determine if a person have the capability to pay where the arbitrary expenses that are used. The Bankruptcy rule defines the other expenses used. Both the arbitrary expenses and arbitrary timing shows some results that do not make any sense in most cases. For example, a teacher who earns a great income and does not receive any pay in the summer may not meet the mean test during the school year, but meet the mean test at the end of the summer when school starts. Another is example is a real estate agent who earns most of his or her commission in the summer may meet the mean test in August. This field is very complicated and has many issues which need knowledge of a Bankruptcy attorney in Maryland. If a person can meet the requirement on paper, does not show a person having a high income to be to pass the scrutiny that will follow in the end of the case.

It is important that timing is everything in many cases. What can beat the mean test in some cases with regards to expenses are the following:

  1. You make huge car payments monthly.
  2. You have to pay for private school for a child with a learning disability.
  3. Your mortgage expense is very high.
  4. You have a large child support or alimony payment each month.
  5. Your tax liability is huge which will not be discharged.

However, this will not guarantee any results as to passing the means test, but it may help you. This requires a bankruptcy attorney who can analyze this situation. Contact the Soubra Law Firm at 301-219-5038 and retain an attorney who can help you in the Bankruptcy process.

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