Does Income Matter When Filing For Bankruptcy?

Charlotte Bankruptcy attorney Bryan W. Stone answers the question: “What are the pros and cons of bankruptcy?”


A commonly misunderstood myth surrounding the bankruptcy process involves a person’s income. Some people believe that if you make above a certain relatively low threshold of income you will be ineligible to file for bankruptcy protection, thus trapping you in your debt, seemingly forever.
different types of graphs Charlotte Mecklenburg Bankruptcy Lawyer North Carolina Debt AttorneyThankfully, this is not the case, far from it in fact. To unravel the issue of income’s impact on filing for bankruptcy protection, keep reading.


Does income matter at all?


The short answer is that yes, income does have an impact on filing for bankruptcy. This is because anyone filing for a Chapter 7 bankruptcy will need to first pass a means test before being found eligible to file. Income does not impact a debtor’s ability to file for Chapter 13 protection, meaning that if you earn too much to qualify for a Chapter 7 bankruptcy, you can simply file for a Chapter 13 plan instead.


What is a means test?


In 2005, federal bankruptcy laws were changed to require anyone filing for Chapter 7 protection to first pass a test showing that their income is less than the median income for a family of the same size in that state. This test simply compared the previous six months of your income with the income for other families of the same size in your same geographic area. Assuming your income falls below the median level, you will be able to file for Chapter 7 protection.


What happens if you fail the means test?


There are certain factors that can impact a means test, meaning that if you are only slightly over the median income levels it is possible to have certain expenses, like insurance, school tuition payments and other bills excluded from your income, hopefully bumping you back onto the right side of the means test.


If this still isn’t enough to get you to pass the means test, then you will need to consider filing for a Chapter 13 repayment plan bankruptcy. Though this process is longer than a Chapter 7 and requires making payments rather than having all your debts immediately liquidated, it can actually be a much better plan for those with assets or property.


If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC  today at (704) 370-2828 or find additional resources here. As professionals who are experienced in the bankruptcy arena, our attorneys will provide you with the best advice for your particular situation.



About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.


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