Did Chapter 7 Bankruptcy Just Become More Difficult?

more+
less-

Chapter 7 bankruptcy has many advantages.  It can wipe out all of your credit card debt, medical bills, and most unsecured debts.  However, it has a couple of downsides – one of which is that you must qualify for a chapter 7 bankruptcy.  How it works is we are required to disclose your monthly income and the total number of people who live in your home.  We then compare your income for your household to the average income for that same household size in Arizona or the state where you live.

For instance, right now in Arizona if you have a household of four, so long as you make less than $61,267 per year, you will qualify to file a chapter 7 bankruptcy.  However, the United States Trustees Office updates these average household income numbers periodically throughout the year and adjust them based upon if incomes are going up or down in your neck of the woods.

On November 1, 2012 the income numbers will change and in Arizona the numbers are going down.  What does that mean?  It means that the average income for Arizona households has apparently gone down over the last several months and as a result it makes qualifying for chapter 7 bankruptcy a little more difficult.  Mind you that the decrease is not great, but sometimes when you are right on the boarder it can make it more difficult.  Starting November 1 if you have a family of four and live in Arizona the income limit for filing a chapter 7 bankruptcy is $59,786 – or about a $2,000 per year reduction.

So what if you are over?  All is not a lost.  You may still qualify for a chapter 7 case.  There are over 20 deductions that can be made that can help you in reducing your income to the point where you will still qualify.  We can deduct things like the taxes you pay, your mortgage payment, car payments, medical bills, term life insurance, disability insurance, charitable contributions/tithing, child care expenses, etc.

The point here is, if you need to file chapter 7 bankruptcy and you are worried that your income is right on the boarder, you may want to file sooner rather than later.  However, even if you are above the average income limits you may still be able to file a chapter 7 case depending on the deductions you have.

 

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© John Skiba, Skiba Law Group, PLC | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.
×
Loading...
×
×