I get this question a lot, and the short answer is an attorney's favorite: "It depends." Both Chapter 7 and Chapter 13 are impacted by the amount of your income, and this threshold question is important for deciding if bankruptcy is right for you.
The first question we will need to answer is "how many people are in your household?" Bankruptcy laws don’t look at your individual income, but the income of the household. This is because it is assumed that a household handles their income and bills jointly.
Next, we look at your household’s yearly income compared to the median (average) income for a household of your size in Missouri. This will tell us if your income is above median, or over median. The current median income figures can be found here.
To file a Chapter 7, you want to be under median income. If you are over median income, there is a complex calculation that the attorney can help you with called the “means test”. This is where certain deductions are taken from your income to see if, once deducted, your income is now below median. If the means test shows that you are still over median, then Chapter 7 is not right for you. Instead, you want to consider a Chapter 13 bankruptcy. Over median individuals are allowed to file a Chapter 13 and pay back some or all of their debt over 3 to 5 years.
What happens if you are under median but you need to file a Chapter 13 for some other reason? Your Chapter 13 repayment plan will not require you to pay back unsecured debts because of your income in this situation.
These situations are complicated with a lot of moving parts. So don’t make an assumption about bankruptcy without getting all of the facts. This is why we offer free bankruptcy consultations at Bearden Law, we want you to be able to make an informed decision that is right for your particular situation.