Tuesday, July 18, 2017

Is It Possible To Make Too Much Money To File Bankruptcy?

When you don’t have enough money to pay all of your bills each month it seems strange to think that you might make too much money to obtain some sort of debt relief. But that question comes up more than you might think when people start looking at filing bankruptcy to alleviate their financial stress. There are two types of bankruptcy cases available to consumers, and one of them does take into consideration your income level.

A Chapter 7 case is a liquidation of debts, and a Chapter 13 case is a reorganization of debts. Most people who file bankruptcy prefer to file a Chapter 7 because it allows them to get rid of all of their unsecured debt, and lasts a shorter amount of time. But in order to be able to file a Chapter 7 bankruptcy, you have to meet certain requirements. Most notably, your secured debt to income ratio has to be a certain amount, as determined by the means test. The means test is:

         Part of the Bankruptcy laws and everyone who files a case has to put their finances through this computation.
         The test compares how much secured debt you pay each month, compared to how much income you bring in each month.
         If the test shows you have at least some disposable income left after paying secured obligations, to put towards your unsecured debts, you will be required to file a Chapter 13 case instead of a Chapter 7.
So while you can never really make too much money to file a bankruptcy case, your income level can dictate which type of case you are allowed to file. In either case, you get relief from overwhelming debt, and are able to get a fresh financial start. And, in either case, you get the benefit of the automatic stay, which prevents your creditors from harassing you as soon as you file a case. Along with the prohibition against contacting you for payment, creditors are also no longer able to file lawsuits against you for collection of debt or garnish your wages. These benefits alone are significant enough to make filing bankruptcy an attractive option when you are in over your head.

If you have more questions about bankruptcy, contact us at www.law-ri.com. We will help by coming up with solutions that work for you and have multiple locations to meet your needs for office visits.

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