Can I File For Bankruptcy If I Have Substantial Income?

When most people think of the financial situations that may drive a person to file for bankruptcy, they likely imagine circumstances in which a person in unemployed or underemployed and has a relatively low income as a result. In reality, people who make “good” money can also find themselves in financial difficulty and may be able to benefit from filing for bankruptcy as well. While the bankruptcy reforms of 20051 tightened the regulations that control who can file for bankruptcy, you do not need to be penniless in order to qualify for relief under the bankruptcy code. The best way to determine whether you can file and could benefit from bankruptcy is to discuss your situation with an experienced Long Island bankruptcy lawyer as soon as possible.

The Chapter 7 Means Test

The statutory provision that determines whether a given person can file for Chapter 7 bankruptcy is known as the “means test.” The test is intended to limit bankruptcy filings to individuals who truly cannot pay their debts. Fundamentally, the means test balances your monthly income against your monthly income in order to determine whether you qualify. There are two steps in applying the Chapter 7 means test:

• Determining whether your income is higher than the median – The first step is relatively straightforward. People who wish to file for bankruptcy must first determine whether their income is higher or lower than the median income for their household house in their state. If it is lower than the median, the analysis is complete, and a person may file. If it is higher, he or she must go on to the second step. The current median income data can be found at the Department of Justice’s website here. 
• Determining your monthly “disposable income” – The second step of the means test is decidedly more complicated. It requires potential filers to deduct their “allowable expenses” from their monthly income to arrive at a figure referred to as your “disposable income.” Allowable expenses are based on both national and local standards, so it is important to discuss your situation with an attorney who practices bankruptcy law in your state. 

Contact a Long Island bankruptcy lawyer today to schedule a free consultation

Anyone who is experiencing financial difficulty should discuss their options with a bankruptcy attorney as soon as possible. To schedule a free consultation with Long Island bankruptcy attorney Ronald D. Weiss, call our office today at (631) 402-5967.