Can You Still File Chapter 7 If You Have A High Income?

07 Oct Can You Still File Chapter 7 If You Have A High Income?


In 2005, Congress changed the U. S. Bankruptcy Code and when that happened, folks got worried that the new laws would stop folks from filing Chapter 7 bankruptcy unless they were very low income. But, it is not as simple as that. The process that Congress put into place is actually a two-step analysis and covers a range of incomes: from low to high. Step 1: Is the debtor above or below median income for their household size for their state? Yes, no means analysis necessary and Debtor is presumed to be eligible for a Chapter 7.

Step 2: If the Debtor is above-median, does an analysis demonstrate that they have the “means” to pay back a portion of their debts? (All the various steps of this process are being litigated all over the country; the other issues being litigated are the definitions of “income”, “household size”–Congress did not include any guidance about whether to use IRS definition, Census Bureau definitions and the new code mixes up both those other agencies’ regulations in with bankruptcy code….kinda a mess, all in all.)

So, the second part of the process is the means analysis. After all calculations are done, at the end of the analysis, at the bottom of the page, a number results. That number is called Current Monthly Income (CMI). If the CMI number is more than approximately $100, the person has to be in a Chapter 13. If the CMI number is less than that or a negative number, the person has passed the “means” analysis and can file a Chapter 7.

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.
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