Navigating Bankruptcy with High Income
In this post, we will cover everything you need to know about chapter 7 and chapter 13 bankruptcies including income limits, median income requirements, disposable income calculations under the bankruptcy code and the means test that determines eligibility for filing chapter 7 or entering a five-year repayment plan under chapter 13.
We will also discuss how your household expenses are factored into determining your monthly disposable income along with allowable living expenses such as rent/mortgage payments, car payments, child support obligations, among others. We’ll go over priority debts like tax debts and consumer debts like medical bills, which are treated differently in each type of bankruptcy case.
Finally, we’ll talk about what happens after filing for bankruptcy, including working with a trustee to create a repayment plan if necessary based on your current monthly income or annual gross income if self-employed or have rental properties generating additional revenue streams.
By studying this guide attentively, you can gain valuable knowledge about how to pass the means test.
Too Much Income for Bankruptcy?
Filing for bankruptcy can be a daunting prospect for many people, inducing feelings of fear and uncertainty. It can be even more intimidating when you are considered having too much income for bankruptcy. Though filing for bankruptcy may appear to be a daunting task, there are strategies available that can assist those with higher incomes in finding debt relief.
The first step in determining if you qualify for Chapter 7 or 13 bankruptcy is taking the means test. The means test examines your current income and measures it against the average household salary of your state over a half-year period. If your current income surpasses the median household earnings in your state over a half-year span, then Chapter 7 is not an option and you must go with Chapter 13.
However, there are some deductions allowed on the means test that could make it possible to pass despite having higher than average earnings. These include any necessary expenses, such as taxes or insurance premiums; secured debts like mortgages or car loans; and certain types of unsecured debts, such as student loans or medical bills. If you have dependents in your household, we can subtract their costs from the aggregate income when deciding qualification for Chapter 7 bankruptcy protection.
The decision to file for bankruptcy is difficult, especially when you have too much income. Though it may be hard to decide, for those with higher incomes, there are choices that could assist them in regaining financial stability and keeping their possessions safe from creditors.
Key Takeaway: To decide if Chapter 7 or 13 bankruptcy is suitable, a means test compares your monthly income with the median household earnings in your state for half a year. If it exceeds this amount, deductions may be allowed on the means test that could make filing possible despite having higher than average earnings. Ultimately, those with too much income can still find relief from debt through bankruptcy proceedings. Many of the deductions are fixed, but some, like medical expenses, charity and domestic support, are based on actual expenses.
Options for High-Income Earners
In filing for bankruptcy, many people assume that their income is too high and they are not eligible. Contrary to popular belief, high-income earners may still take advantage of bankruptcy options. High-income earners have several options available to them when dealing with overwhelming debt.
Debt Settlement:
One option for those who earn a higher salary is debt settlement. This involves negotiating with creditors in order to reduce the amount of money owed on each account or eliminate certain debts altogether. The process may be complex and drawn-out, yet it could lead to considerable savings for the eligible. Therefore, it is advisable to seek the advice of a knowledgeable tax advisor before entering debt negotiation. Tax consequences and low success rates are reasons not to settle debts.
Taking Out Personal Loans:
Another option for high-income earners is taking on more debt. If you had a temporary loss of income and can now pay off the debt, this may be a suitable alternative.
Despite not being the most attractive choice for those with higher incomes, there are still alternatives available to help ease financial stress. Unfortunately, many people don’t realize that certain deductions can reduce their income for bankruptcy and make them eligible for a Chapter 7 or 13 filing.
Little known deductions on the means test
For the means test, many high-income earners don’t realize that there are several deductions available. That there are deductions accessible to those with higher incomes can have a significant effect on whether they meet the criteria for Chapter 7 or 13 bankruptcy.
First off, we may deduct charitable contributions from your income when calculating your disposable income on the means test. When finding out if you’re eligible to file for bankruptcy under either Chapter 7 or 13, we can subtract the amount of money given away monthly from your total gross income.
Medical expenses are also deductible when calculating your disposable income on the means test. We can deduct expenditures for medical care from one’s disposable income when determining eligibility for bankruptcy.
Chapter 13 allows extra deductions for amounts paid into retirement plans and amounts paying back retirement loans.
Knowing the little-known deductions on the means test can be beneficial to your case, and working with an experienced attorney will help you understand how they apply.
Key Takeaway: Even if their income exceeds the means test threshold, high-income earners may still qualify for Chapter 7 or 13 bankruptcy protection by taking advantage of deductions for charitable contributions and medical expenses, as well as potential special exceptions. This is because deductions are available for charitable contributions and medical expenses, which can reduce a person’s disposable income.
Working with an Attorney
When considering filing for bankruptcy, it is essential to work with an experienced attorney. Look at things like 5 star reviews and word-of-mouth recommendations to pick an excellent attorney.
One of the most important things to consider when looking for an attorney is their experience in dealing with high-income earners. An attorney who has experience in working with individuals having considerable wealth can be more capable of tackling any potential troubles or matters that could occur during filing. An attorney with experience in handling high-income earners will be better equipped to provide more precise counsel on the best course of action and potential options.
Another key factor when selecting an attorney is their ability to negotiate on behalf of their client’s interests. It is imperative that the attorney be knowledgeable in relevant state and federal regulations concerning bankruptcy, as well as any other legal issues which could impact your situation. A good lawyer should be familiar with all aspects of debt relief law so they can effectively represent your needs in court or negotiations with creditors.
An experienced attorney can be your saving grace in navigating the complexities of the means test. They are well-versed in all aspects of debt relief law and will know about any deductions you may not have heard of that could make an enormous difference between qualifying or being denied bankruptcy protection. With their expertise, they can effectively advocate for your interests in court or during negotiations with creditors, giving you the best chance at success.
Key Takeaway: An experienced attorney can be your saving grace by navigating the complexities of bankruptcy, understanding all applicable laws and negotiating on behalf of their client’s interests. An experienced attorney can be your saving grace in navigating the complexities of bankruptcy, understanding all applicable laws and negotiating on behalf of their client’s interests; they are well-equipped to provide a strategic advantage for high-income earners in order to optimize the filing process.
FAQs in Relation to Too Much Income for Bankruptcy?
Can you file for bankruptcy if you’re rich?
Yes, it is possible to file for bankruptcy even if you are wealthy. No matter the individual’s financial status, they may still be eligible to file for bankruptcy under Chapter 7 or 13 of the Bankruptcy Code. It is essential to speak with a competent bankruptcy lawyer in order to decide if you can qualify for bankruptcy.
What are the 3 most common causes of bankruptcy?
1. Medical bills can unexpectedly accumulate, causing financial strain that may lead to bankruptcy for some. These costs are often difficult to plan for and may quickly add up beyond a person’s ability to pay them off.
2. Job Loss or Reduced Income:
A job loss or reduction of income is another common cause of bankruptcy filings as it reduces the amount of money coming into a household each month without reducing the bills that need to be paid out.
3. Credit Card Debt:
High credit card debt can become unmanageable when payments on multiple cards exceed what an individual can afford each month, leading them down the path towards filing for bankruptcy protection from creditors.
Conclusion
For those of higher earning potential considering bankruptcy, it is vital to be aware of the restrictions and income limitations when submitting. Working with an experienced attorney can help you explore all deductions on the means test and other solutions to address your financial situation.
If you are struggling with too much income to file for bankruptcy, the Law Office of William Waldner can help. Contact us today to discuss your options and start finding financial freedom.