What are the income limitations on filing a bankruptcy?
Previously I spoke of exempting your property so creditors would not be allowed to attach your property. The other requirement is that your monthly net income and monthly living expenses have to be about the same. Otherwords, you can not have much income after expenses left over each month. However, the Bankruptcy Code does allow you to have a little over $100.00 left over each month. There are basically two income tests. The first is the means test. What is looked at is your gross income over the past 6 months. So you need to provide your pay information for the past 6 months prior to the date that you file. The IRS provides various types of deductions that you can take from your gross income to arrive at a monthly disposable income. This income is then annualized and compared to a medium state income for the number of people that live in your household. Where you come down on that scale determines whether you can file a Chapter 7 or Chapter 13 Bankruptcy. The means test looks at your past income. There is another income test and that is Schedule I & J. Here your income moving forward is looked at. Your monthly pay information minus such mandatory deductions as taxes, etc. are used to arrive at your monthly net income. Then your monthly living expenses are deducted from your net income. These can be broader and include more of your actual living expenses than just those allowed on the means test. Again, the two figures need to pretty much offset each other. Income is considered to be about anything derived from any source. However, there are some items that are excluded from these caculations. For instance, social security is not considered in making these calculations. If you are able to pass these tests, then you can file a Chapter 7 Bankruptcy. If not, you will need to file a Chapter 13 Bankruptcy that may have many benefits of its own.