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Chapter 7 with high income

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  • Chapter 7 with high income

    I’ve consulted an attorney regarding my intended chapter 7. He ran my means test and concluded I pass, but not by much. I’m a high income earner, 100,000+ a year. Does passing the means test with a clean case, as in no properties other then home and two cars with payments assure a chapter 7? Has anyone had issues with the trustee filing or been forced into a chapter 13? Thank you in advance.

  • #2
    There is no magic formula, especially if you're over the median income. The only true "clean" case is when there is no property!

    You just have to complete all the paperwork and that will determine whether you have enough money to fund a Chapter 13 (a/k/a the "means" to support a Chapter 13 causing you to fail the means test). Many people have had objections to their Chapter 7 cases for a variety of reasons. The reasons are fact-specific to the individual and their circumstances - and even their special circumstances.

    I converted from Chapter 13 to Chapter 7 while making more than twice your income. The individual factors are what matter. No one can advise you on the subject for your specific case, except someone (such as an attorney) that has gone through all of your income, expenses, property, and other factors.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.


    • #3
      I am in the middle of that right now. I passed the means test and have very little left over. I was set to be discharged today. But the chapter 13 trustee has asked for more information and my lawyer if fighting to keep it a 7.


      • #4
        Originally posted by Izz918 View Post
        I am in the middle of that right now. I passed the means test and have very little left over. I was set to be discharged today. But the chapter 13 trustee has asked for more information and my lawyer if fighting to keep it a 7.
        The US Trustee, not the Chap 13 trustee, asked for more information. The Chap 13 trustee gets involved only if you actually file a Chap 13. Converting a Chap 7 to a Chap 13 is completely voluntary. You cannot be forced into a Chap 13.

        As JB, points out "The individual factors are what matter." An attorney often will not know all of the relevant factors during an initial consultation. So, be prepared that the conclusion could change when they review your complete financial situation.

        The factor in Izz918's case appears to be that she filed without her husband and the US Trustee wants to review her husband's income and expenses to verify the marital adjustment. Something completely different could cause the US Trustee to be interested in your case. As I high earner, you should definitely be prepared to provide documentation of your expenses.
        LadyInTheRed is in the black!
        Filed Chap 13 April 2010. Discharged May 2015.
        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


        • Izz918
          Izz918 commented
          Editing a comment
          All this time I was thinking it was the 13 trustee but you are right. They both had the same first name so I was confused. My lawyer put together a letter explaining the situation and hopefully I will have an answer in the next few weeks. Yes it is because I filed without my husband. My lawyer said he is looking for on time payments and what his credit is used for. He refused to file due to his good credit and needs credit cards for work since he travels a lot. Plus in case of emergency we need to get a new car or something with the house. Either way if it goes 13 it wont be a big amount and only 3 years. It is doable. I just want it to be over...

        • Izz918
          Izz918 commented
          Editing a comment
          I also didn't realize you can not be forced in to 13. What happens in that case? Does your case get dismissed?

      • #5
        I was in a similar situation, being well over median. One attorney wanted me in a 13 immediately, but another ran the numbers and thought I could squeak by in a 7 due to high mortgage and car payments.

        The 341 went fine, and the UST never objected.

        It is by no means guaranteed, though. You will get extra scrutiny because of your income, but your lawyer knows this.
        Chapter 7, above median, no asset. Discharged with no UST involvement.


        • #6
          When it comes to filing chapter 7 bankruptcy and the debtor is over median income, the question becomes "why" is there no disposable income to fund a chapter 13 plan. Then, is the answer to that question reasonable (in bankruptcy terms). If you are close to median, about $5K to $6K per year over, you can usually eat into that with higher than average payments on secured debts like 2 cars and mortgage and your tax withholding. However, if the debtor gets $8K to $10K or more over median per year, that becomes a challenge to keep them in chapter 7 (in a typical consumer case). In that situation, secured debt payments are usually not enough to make up the difference, so something needs to be going on in the debtor's life that creates an extraordinary situation and expenses (think medical, or child support, alimony, etc).

          Sometimes the situation fails in reverse. You might have a debtor who is barely over median, but because they don't have a second car, there is no way to get them past the means test.


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