Income Question

[Teri]

I have been reading a lot here and now I am scared. My husband and I combined make a total of about $110,000. Is this too much to file a chapter 7? We have 7 in our household - securred debt of 245K, unsecurred debt of about 100K

[HHM]

Until October 17, 2005, there is no arbitrary max income for filing chapter 7.

If your living expenses are such that they are equal to or more than your income, and those expenses are reasonable (note, living expenses do not include payments to credit cards), then you may still qualify for a chapter 7.

but generally, when income starts pushing 6 figures, the US trustee gives the case more scrutiny. Thus, its not impossible to file a 7 with that income, but it is more difficult.

[concerned]

If your living expenses are such that they are equal to or more than your income, and those expenses are reasonable (note, living expenses do not include payments to credit cards), then you may still qualify for a chapter 7.

So when they look at what you can pay they DON'T include what you must pay to credit cards?

[accentone]

concerned, when you write up a budget for the court, you do not include credit card expenses, only living expenses.
Good luck!!

[HHM]

So when they look at what you can pay they DON'T include what you must pay to credit cards?

Exactly, because those credit cards would be discharged.

Look at it this way, you are filing BK because you have decided you can no longer pay your debts. Bankruptcy is a legal way to breach your credit contracts, however, in exchange for this legal way to breach contracts, the court will see if you have any means to pay at least something back to your creditors. The court allows you to spend money to meet your necessary living expenses, (things like rent/mortgage, transportation, groceries, utilities etc), however, if you have something left over after paying your living expenses, the bankruptcy court will want you to at least pay that back to your creditors.

Thus, that is why its difficult for those with 6 figure incomes to have a successful chapter 7 because generally, you don't need $100,000 plus a year to have a reasonable standard of living. However, it all depends, if you live in an expensive, (i.e. San Francisco) and have 4 children, you might be able to file chapter 7.

I am not saying you can't do it, but you need to sit down and figure out a budget, start tracking where all your money goes, i.e. groceries, utilities, hair cuts, rent/mortgage, insurance, car payment, eating out, etc.

[RickD]

Re: income level for Chapter 7

Teri

for a family of 7 check out your income level at this website

http://www.bcande.com/bankruptcy.html

click on your state and family size. For an income level of $110,000 you may still be under the median income in which case you can get a chapter 7 discharge.

[RickD]

income level

I forgot to say, once you click on the link, then click, "take the means test".

then select your state and family size

[StaciMM]

Median income is not a qualifying factor before 10/17.

Get a notepad and write down everything you spend money on. The major monthly things are easy (rent/mortgage, utilties, insurance, etc.) but also list the variable categories such as groceries, laundry/dry cleaning, household cleaning supplies & maintenance, personal care items, hair cuts, school lunches, day care, etc. Then, things you spend $$ on but not on a regular schedule like clothing, vehicle maintenance & tags, pet vacinations, school supplies, etc.

Debts you would include would be student loans & tax payments (those are generally not dischargeable) & secured debts that you'll be keeping (up to 1 vehicle per driver in the household).

If you come out with very little remaining, chapter 7 may be for you. If there is a little remaining, chapter 13 might be right.

[RickD]

income level

Also note:

I notice you have secured debt. Is that a mortgage on a home? if you are a homeowner and behind on your mortgage it would be best to file Chapter 13 for the repayment plan option. If you have very little left in your budget then you can still save your home and discharge your debt under chapter 13 provided you complete your plan. If you are a homeowner and current on your mortgage you can file Chapter 7 so long as you don't have alot of equity in the home.

[edwards2]

Terri - we are a family of 3 and our income was almost $100k; however, we had insurmountable medical debt including monthly expenses for special food, etc., IRS penalties and my husband didnt work full time for 5 months. Even when I started working full time we were still behind the 8 ball so to speak. So do sit down and write everything down...I mean everything you spend money on and pull out your checkbook if you have to. Sometimes we forget about school things like dues, books, etc. There is also an IRS calculator that might help with totalling your monthly expenses. I can attest the trustee checked over our filing with a magnifying glass because of our income despite all of our obligations. Admittedly, it was touch and go for a few months but we did receive our discharge in August. Rick D is also right about your house....if you are current you can file a Chapter 7; if not, you might be looking at a Chapter 13. Finally, dont wait too long because the new BK law takes effect in mid-October and as everyone has been saying and posting on this forum you dont want to be filing under that law. We are here to help.

[Teri]

I appreciate all of the responses. We have filled out our chapter 7 papers. Our monthly income (after taxes, etc) is $7048 (which is providing I work quite a bit of over time, that is up and down) and our expences are $7753. Our mortgage alone is $2121 (it went up from $1867 because of a escrow deficit - long story) We will be caught up on the house payment by the 341. I hope our expences are accepted. I don't believe they are unreasonable for a family of 7 - all over 15. Any advice? We plan on filing the paper work this afternoon. Boy am I scared! I checked the state medium for our family and it is $85K.

[StaciMM]

If your OT isn't something you can count on, is there any particular reason for counting it in your income?

[HHM]

If your OT isn't something you can count on, is there any particular reason for counting it in your income?

Exactly, why overestimate your income? When it comes to overtime, whether to include that or not depends on how consistent it is. To figure that out, if you have been working overtime over the last six months, then average the overtime for that period and then include that in your stated income.

For example, lets say you had the following overtime.
Sept. $500, Aug. $300, Jul. $600, Jun. $200, May $100, Apr. $400

That would indicate that the fact you work overtime is fairly consistent, and your average monthly overtime is $350. Thus, on your petition, you would include that additional $350 in your income. Your petition is snapshot of your financial life as it appears on the day of filing, and just like photographs, they do not look into the future.

But you don't want to put in estimated overtime that you will have in the future. A chapter 7 bankruptcy looks back from the date of filing, it does not look foward.

But since you are a familly of seven, I think you will be fine.

[StaciMM]

For the record, my expenses for a family of 5 total about $4300/mo, and my kids are all young. (Teenagers cost more than little kids, LOL.) When you put it all in perspective, I don't think your #'s are unusual-based on the info I have at least.

[brokemama]

terri, my husband and I filed Chpt 7 this yr and was discharged, we had total income fo 122 K, but our living expenses where way over our monthly income. they never gave us a second look. Just be honest about your expenditures and you should be ok. after we seen our lawyer there we expenses that he wrote down that I never even thought about. good luck.