Income Considerations In Bankruptcy
For many people, the thought of how income influences their bankruptcy case never crosses their mind. After all, lacking sufficient income is part of the stress in financial hardship. However, it is important to know how your income does plays a significant role in the outcome of your case.
The first area in which your income influences your bankruptcy case is in eligibility. In order to qualify for a Chapter 7 filing, your income must pass the means test. The Chapter 7 means test is used to evaluate your income against several factors to determine your eligibility, including the median income level of your state. If you do not pass the means test, you may need to file for Chapter 13 instead. That isn’t to say that Chapter 7 is only for the poor; rather, it is for the financially insolvent whose debt burden exceeds capability of being repaid with their disposable income level. The bottom line is that your financial situation is unique, and your eligibility is influenced by many factors.
Another important area to consider is changes to your income while in an active bankruptcy case. Losing income could result in a lower payment requirement in a Chapter 13 case, or a conversion to a Chapter 7 case. Additional income could increase your Chapter 13 payment, or disqualify you from your current Chapter 7 case. While most people don’t experience employment changes during a bankruptcy, inheritance money, tax refunds and some additional payments could influence your case. All of these types of monies are considered income and, therefore, become part of your bankruptcy estate.
There are some specific rules for how changes to your income are managed as part of your case. There is no guarantee that you will lose this money, but you are required to report such changes to the court. Always inform your St. Petersburg bankruptcy lawyer of any changes to your income, debts, funds or assets in order to avoid delaying or tampering with the outcome of your filing.