For a lot of debtors, chapter 7 bankruptcy is preferable to chapter 13 because it discharges their debt entirely. With chapter 13, on the other hand, debtors must pay back some or all of their debt over a three to five-year period.
Although some people must file chapter 13 because they do not qualify for chapter 7, the income requirements for the latter are a lot more flexible than many debtors realize. Below, the legal team at Bueker Law Firm in Stuttgart, AR, shares a few things everyone should know about discharging debt despite having a relatively high income.
Understanding High-Income Chapter 7 Bankruptcy
The Means Test
In general, you must pass the Arkansas means test to declare chapter 7 bankruptcy, but there are some exceptions. For example, those who have an income that is below the state’s median for a household of their size do not have to take the means test, nor do those who are hoping to discharge debt that is not primarily consumer debt. Disabled veterans who accrued most of their debt during their time of service are also exempt from the means test.
If none of the above applies to your situation, you must complete the means test, which is merely a formula for determining if your family has the funds to make regular payments under chapter 13. The means test is comprised of totaling all streams of income and then subtracting any allowed expenses.
Those who have a relatively high income for a household of their size may still be eligible for chapter 7 if they have enough allowable expenses. Such expenses might include mortgage payments, day care bills, and health insurance. In general, you are allowed to include costs that contribute to your family’s health and welfare in the calculations.
It is important to remember that just because you are eligible to file for chapter 7 does not mean you should. Both chapter 7 and chapter 13 have pros and cons, and a seasoned bankruptcy attorney will ensure you understand all of them.
If you need debt relief, turn to Bueker Law Firm in Stuttgart, AR. Jeremy Bueker is proud to offer the resources of a large firm with the personalized representation of a small practice. Visit them online to learn more about the legal services they provide for those who want a fresh financial start, or call (870) 673-1313 to schedule a consultation with a bankruptcy lawyer.