Having represented debtors in bankruptcies for over 20 years, I found that there are common misconceptions about earnings:
- “Bankruptcy is only for the unemployed” or
- “I earn way too much to qualify for bankruptcy”.
The truth is that: You cannot earn too much to make you ineligible for bankruptcy. In fact, in a bankruptcy reorganization for individuals (Chapter 13), there is a requirement that the debtor have sufficient income to cover his/ her basic living expenses.
Most of my clients are employed. Many of my clients had rather high incomes yet still qualified for bankruptcy. By high incomes I mean $100,000 to $200,000 per year. One of my clients actually earned over $300,000 per year.
How is this possible?
There are several chapters of the bankruptcy code which accomplish different goals for clients. Those different chapters have different requirements.
Under the right circumstances, clients save more money in a reorganization than they would in a liquidation (Chapter 7). In other words, they save more money by paying some back to creditors than they would if they paid back nothing.
The reasons for filing bankruptcy vary amongst my clients.
Here is a list of common questions related to specific situations:
- “How much can I earn and still file for bankruptcy?”
- “Can I reorganize my past due mortgage payments so I can keep my house or car?”
- “Can I surrender my house to the bank but I want to stay until the foreclosure sale?”
- “Can I get protection from creditors so I can refinance my mortgage?”
- “Can I set up a bankruptcy payment plan to pay my creditors over time since I cannot pay the minimum payment or the interest that is due monthly?”
- “What can I do since I am getting laid off in a month and I do not want the creditors coming after me while I look for a job?”
- “What can I do? There is a wage garnishment pending, and when it goes through, I will not be able to pay my rent/mortgage?”
- “What can I do? A creditor has levied my bank account and I cannot use the money in that account to pay my bills?”
Due to the many scenarios by which someone can file for bankruptcy and the different types of bankruptcies, it is essential that a person contemplating bankruptcy makes an appointment with an attorney to go over your specific questions, situation, goals and match the client to the proper financial solution.