Get Answers from Wink & Wink, Leading Denver Bankruptcy Lawyers
If you’ve decided to file for bankruptcy, it’s possible that you’ve begun researching the differences between Chapter 7 and 13 bankruptcy, as well as the potential benefits of each of these solutions for your financial difficulties.
Most of our clients come to us because they recognize that tapping the expertise of Denver bankruptcy lawyers can help them arrive at the best possible outcome for their particular situation. Many of them are curious, for example, about how income plays a role in how they file.
A free consultation can help our clients clear up specific questions they may have about bankruptcy, debt settlement, and the role of a bankruptcy lawyer. Free consultations can also lay the groundwork for a particular strategy and approach to make bankruptcy as beneficial as possible, even in spite of the various challenging circumstances our clients experience.
It is our goal to provide as much general information as possible to help clients make a decision about whether to seek the assistance of a bankruptcy attorney near you. Read more to find out specifically about your income’s relationship to how you file for bankruptcy; then, learn how to schedule a free consultation with us at Wink & Wink, the leading Denver bankruptcy lawyers.
Chapter 7 Bankruptcy and Income: Key Information from Wink & Wink
Chapter 7 bankruptcy is perhaps the form of bankruptcy that our clients are most familiar with. In the case of Chapter 7 bankruptcy, many types of debts can be discharged, while – in most cases – you can keep your assets, such as your house, car, and “tools of the trade” (assets that are related to your main source of income).
This form of bankruptcy is not for everyone, however. One of the most significant reasons is related to income. For Chapter 7 bankruptcy, there is a median income threshold, meaning that if your household income is greater than the median income for your household size in the state of Colorado, you may not be eligible for Chapter 7.
Household income includes both you and your spouse’s income, even if you are filing for bankruptcy individually. Keep in mind, though, that comparing Chapter 7 and Chapter 13 bankruptcy is not as simple as “if you make X amount, this is your solution.”
Understanding the Chapter 7 Bankruptcy Means Test
For Chapter 7 bankruptcy, the so-called “means test” is meant to determine your average monthly income for purposes of determining your eligibility for Chapter 7. It starts by looking at the gross income from all sources in your household over the 6 months ending the month before you file. For example, if you file bankruptcy in October, your income from April through September will be the starting point for determining your monthly income for purposes of the “means test.” Sources of income that are included in your median household income other than your salary include assets such as dividend payments on stocks you own or rent you receive from people living in your home. However, you can exclude income from social security, including social security disability, as well as VA disability income. The law is designed to keep you from having to repay creditors from this income. If your monthly income is less than the median income for your household size in Colorado, Chapter 7 bankruptcy is likely the solution you should pursue. However, if you make more than the median household income, you still may be able to file for Chapter 7 bankruptcy.
When your average is over median, you must complete the expense portion of the means test (aka “long-form means test”) to determine your disposable income. The long-form means test includes standard deductions for certain things such as food, clothing, and utilities. Some of these standard deductions are the same regardless of where you are in the country. However, rent and utilities are determined based on the county in which you live. Therefore, these deductions will vary depending on whether you live in Broomfield, Denver, Boulder, Golden, or Littleton, Colorado.
Other expenses on the long-form means test can be based on what you actually spend. For example, domestic support obligations and the costs of certain insurance including term life, health, and disability insurance are all allowed deductions on the long-form means test. The end result of the long-form means test is your monthly disposable income, which is your household income minus allowed expenses. If this is a positive number, you are likely not eligible for Chapter 7 and it represents the amount you’ll have to repay creditors in Chapter 13 bankruptcy.
There is an exception to the means test if the majority of your debt is non-consumer debt, which includes business debt and taxes. If the total of your non-consumer debt exceeds the total of your consumer debt (which includes mortgages, car loans, student loans, medical bills and most credit card debt), then you are eligible for Chapter 7m even if your income is over median.
If you are not eligible for Chapter 7, it is important to compare the cost of Chapter 13 bankruptcy to the cost of settling your debt outside of bankruptcy. Depending on your disposable income and total debt, Chapter 13 bankruptcy may or may not be cost-effective as compared to settling your debt outside of bankruptcy.
Fortunately, as Colorado bankruptcy attorneys near you, Wink & Wink can help you make a determination about whether you are eligible for Chapter 7 bankruptcy and, if not, whether Chapter 13 bankruptcy or settling debt outside of bankruptcy is most cost-effective for you.
Chapter 13 Bankruptcy and Income: Why Wink & Wink Might Recommend This Approach
Chapter 13 bankruptcy applies to those who make more than the median household income threshold and allows them to pay their debt on a three- to five-year plan. Many of our clients see this method as an affordable opportunity to get a fresh start. During your payment plan, you can start rebuilding credit so that it is possible to be eligible for a mortgage while your payment plan is still pending. In some cases, this is the fastest way for someone in debt to rehabilitate their credit. In this sense, Chapter 13 bankruptcy is empowering, as it allows the client time to make payments and improve their finances.
As with Chapter 7 bankruptcy, it is highly beneficial to work with a Denver bankruptcy lawyer who understands Colorado law, including all of the legal qualifications that determine whether you’re able to file for Chapter 13 bankruptcy. Going it alone or trying to uncover the answers online can be more confusing than clarifying. This is why Wink & Wink offers free consultations.
The leading bankruptcy attorneys near you, we can sit down with you and go over all of your income, your expenses, and your specific situation, whether it includes medical debt, alimony or child support payments, or any of the other details and circumstances you bring to us.
Work with the Leading Bankruptcy Attorneys in Denver: Wink & Wink
Once we get into the finer points of Chapter 7 and 13 bankruptcy, most clients recognize that working with a Denver bankruptcy lawyer is the best approach. It is our responsibility to stay up to date on Colorado bankruptcy law, so that you don’t have to go it alone. In addition, we devise expert strategies to find the best solution for you within bankruptcy law, so you benefit the most, including potentially rebuilding your credit score.
Whether we are working with clients on debt settlement, small business debt, or the forms of personal bankruptcy described in this article, we offer expert, relevant advice to help make the best decision for every client.
Wink & Wink offers a free consultation to help us understand what your particular needs are, and how we can customize our strategy to find success for you. There is no shame in filing for bankruptcy, as this solution is built into our legal system to protect and ultimately benefit you.
Call us at (303) 410-1720, or send us a message online for all of our legal services, including debt settlement and bankruptcy. A superior team of bankruptcy attorneys near you, we specialize in helping our clients find a path to a better financial future.