It seems odd to think that there is such a thing as making too much money, and especially too much money to file for bankruptcy because at least once or twice most people have heard or been told that bankruptcy is available for nearly everyone. While this is generally a true statement, there are certain rules that have to be followed and in some cases the amount of income you have does play a pivotal part in seeking relief from the bankruptcy court.
There are two main types of consumer bankruptcy; a chapter 7 or a chapter 13. A chapter 7 is like a liquidation of your debt and it allows you to eliminate all of your unsecured obligations like high interest rate credit cards. A chapter 13, on the other hand, is more like a reorganization of debt or a debt consolidation. The way a chapter 13 works is that the debtor proposes a plan of repayment which includes paying back at least a portion of unsecured debt. A chapter 7 case is usually completed in about 6 months while a chapter 13 can take up to 5 years. These differences make chapter 7 cases more desirable to most people, but in order to file a chapter 7 certain requirements must be met:
- Your secured debt to income ratio has to be a certain figure, or you will be required to file a chapter 13 instead of a chapter 7.
- The calculation spans a period of time that takes into account at least 3 months prior to your filing date, so if you receive bonus or overtime income at a certain time of the year your ability to file a chapter 7 may be impacted during that time.
This mathematical computation requirement was put in place in 2005 and changed the way bankruptcy filings across the country are handled. If your income figure is more than the calculation for a chapter 7 and you file a chapter 7 anyway, there is a chance the government will claim the filing was not done in good faith. If that happens, your entire case can be dismissed and all of your debt will remain due. The computation is best done by a trained professional, so you are certain that it is done correctly and that you do not run the risk of being charged with bad faith. If you are unable to pay your debts as they become due, call us for help. We will make sure you file the kind of case that is right, and that you understand your options.
For more information about bankruptcy, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that work for you.