Bankruptcy can help people dealing with various types of situations. One misconception is that only people with low incomes can file.
What about those who make good money? In Indiana, individuals with higher incomes can still seek relief, whether through Chapter 7 or Chapter 13.
Means test
The “means test” evaluates a person’s income and expenses to determine if they qualify for Chapter 7 bankruptcy. It allows for the discharge of certain debts and is for people who cannot make regular debt payments.
Even if you earn a good income, you may still qualify for Chapter 7 bankruptcy. The means test compares your average monthly income from the past six months with the median income for a household of similar size in Indiana. If your income is below the median, you may automatically qualify for Chapter 7. However, if your income exceeds the median, further analysis may occur.
Expenses and deductions
Even if your income exceeds the median, you may still qualify for Chapter 7 bankruptcy if you have significant allowable expenses and deductions. These include expenses such as mortgage or rent payments, utilities, transportation costs and health care expenses. Deductions for taxes, insurance and certain other expenses may also factor in.
Disposable income
If, after subtracting allowable expenses from your income, you have little to no disposable income, you may still be eligible for Chapter 7 bankruptcy.
However, if you have enough disposable income to repay a portion of your debts, you may have to file for Chapter 13 bankruptcy instead. Chapter 13 involves creating a repayment plan to pay off creditors over three to five years.
By understanding a few things, you can make informed decisions about your financial future.
