One of the most prevalent bankruptcy myths is that high-income borrowers make too much money to file. However, depending on the financial condition, you may be eligible for Chapter 7 and Chapter 13 regardless of the income. Let's take a look at how high-income people are treated when they file for bankruptcy.
Chapter 7 Bankruptcy and Earnings
Most people prefer to file this form of bankruptcy since it eliminates most existing debts, like credit card debts, and medical bills, without needing the debtor to make monthly payments to creditors for 3 to 5 years.
However, not everyone fulfills the Chapter 7 discharge needs. The two-step means test should be passed.
The first section asks if the family's earnings are less than the nation's median income. If it is, you will be eligible and will not be required to finish the second part.
If you have a high income and support a large number of people, you can skip the first part.
Chapter 7 Bankruptcy Eligibility
Some borrowers prefer Chapter 7 bankruptcy since it is quick. Even though it technically needs the liquidation of investments, most people keep the homes, cars, and retirement accounts since there are many exemptions.
Is There a Restriction on How Much Money You Can Make if You File Chapter 7?
Yes. Top earners, on the other hand, may find it difficult to meet the needs for Chapter 7 bankruptcy.
People with a high income are finding it harder to meet the criteria for Chapter 7. This federal law aims to force those with sufficient financial resources to repay a greater portion of their loans through a Chapter 13 payment schedule.
The defense attorney will use the means test to determine which sort of bankruptcy you are eligible for. You can contact Fong Law Firm if you live near Monterey Park California and surrounding areas.
Chapter 13 Bankruptcy and Income
Many users save more cash in Chapter 13 or at least minimize their monthly payments. A trustee will prioritize your debts in this type of bankruptcy, and a monthly mortgage plan will be formed. Following the calculation of the income and expenditure, the program needs to make your "perfect effort" to pay back the debt.
What Role Does Your Income Play in Chapter 13 Bankruptcy?
Bankruptcy laws do not prevent someone with a high income from filing for Chapter 13 bankruptcy protection. However, the length of the repayment schedule established by the person will be influenced by the income. Those getting paid more than the present state median, according to the court, can pay back a large portion of the debt owed.
The leftover non-priority existing debt will be dismissed once the Chapter 13 installment plan is completed. You will then be free of that debt.
Can I Make a Lot of Money and Bankruptcy?
Top earners who file for Chapter 7 bankruptcy must demonstrate that they are acting in good faith. To their debt holders, their expenses should be fair and accurate. In general, you won't be able to pay for luxury products if you haven't paid the unsecured creditors.
Call Fong Law Group at (626) 289-8299 for a FREE consolidation, and talk to an attorney today. We are here to help you get through this difficult time in your life, and help you with a Fresh Start.