An Expected Raise May Be a Reason To File For Bankruptcy Now
You may have heard or read that many employers are planning on offering raises to their employees next year. That’s great news, but it may also limit your bankruptcy options. It may be counterintuitive, but an expected raise may be a reason to file for bankruptcy now.
Chapter 7
Here’s why: Qualification for Chapter 7 is based on your income for the six months prior to filing. If your income is too high, you may no longer qualify for Chapter 7 and will be forced into a Chapter 13 case instead (more about that in a moment.) So if you think that Chapter 7 may be in your future, you’ll want to meet with us now to determine the appropriate time to file. We typically reserve Chapter 7 for simple cases where the client has general unsecured debt, like credit cards, personal loans and medical bills. (When a client has car loans, tax debts or home loan delinquencies, we normally recommend filing under Chapter 13.) Keep in mind that there are exceptions to the income limitations which may allow you to qualify for Chapter 7 even if your income is above median.
Chapter 13
For Chapter 13, we also review your income for the six months prior to filing. Depending on whether you are an above or below median income earner will determine the term of your Chapter 13 plan: either three years or five years. Since Chapter 13 requires payment of your monthly disposable income into the plan, making the payment for three years instead of five may save you a tremendous amount of money. As well, being in bankruptcy for only three years will allow you to reestablish credit that much sooner!
For more detailed information regarding your bankruptcy options, and whether now is the time to file, please call us for a free consultation. We look forward to meeting you!
