Income Limits For Bankruptcy: Truth and Myths

Myth:  I heard I make too much to file for bankruptcy.  Anyone, no matter how much or little they earn, can file bankruptcy .  Read below about income and how it may affect bankruptcy filing.

NC Bankruptcy Lawyer in Charlotte North Carolina for Chapter 7 / Chapter 13

I have heard a number of people say that they "made too much to file for bankruptcy" but what they heard and what the law says are two different matters.

In 2005, the bankruptcy laws changed to require that people who make more than the median income of their state have to take a test, called the Means TestThe income level sets who has to take the test, not who can file for bankruptcy.
Many above median income debtors are still able to file for Chapter 7 bankruptcy depending on the outcome of the Means Test.  Even if they don't pass the Means Test, there may be circumstances that allow the filing of Chapter 7 anyway, and there may be a lot of help available in Chapter 13.  Contrary to a popular myth, filing Chapter 13 does not mean that you have to repay your debts in full, only that you pay according to guidelines linked to your assets and your ability to pay.
The Means Test is used to determine if someone can file for Chapter 7 bankruptcy (a faster type of bankruptcy that discharges most unsecured debts), or whether the law assumes they have enough money to pay some (or all) of their debts back in a Chapter 13 repayment plan.
Even if someone passes the Means Test, it doesn't mean they should file for Chapter 7.  Chapter 7 can help many people who don't have a lot of assets and can't pay their debts, but there are several reasons to file Chapter 13 that might benefit someone more than a 7.  Each case needs to be looked at to see whether or not there is a reason to file, or not to file, a particular bankruptcy type. 
Finally, many people seem to think that if they don't qualify for Chapter 7, that they have to repay ALL their debts in Chapter 13. That isn't true either. Many people pay a substantially reduced and affordable payment plan in Chapter 13. 
Either way, many people find huge debt relief in bankruptcy no matter which way they go.

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DISCLAIMER: This message is intended as a general discussion of legal issues and not as a statement of fact, legal advice or a legal opinion.  Personal opinions may also be expressed.  No attorney-client  relationship is created by this message.  Do not act or rely upon law-related information in this communication without seeking the advice of an attorney licensed to practice in the relevant area.
 
The Law Office of Susanne M. Robicsek is
a Federally Designated Debt Relief Agency
under the Bankruptcy Code.
I file bankruptcy cases for people in financial need,
and have been doing so since 1989.

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