Bankruptcy “reform” was enacted at the behest of the creditor lobby, you know, the ones with the money, in 2005 partly on claims that many people were filing Chapter 7 bankruptcy who could afford to pay at least some of their debts in Chapter 13 bankruptcy.
Contrary to popular belief, that has NOT happened.
Some people still call me saying they make too much money to file bankruptcy.
I have to run the numbers through the software and analyze the results before making that statement.
I have had maybe four clients in seven years who could not fit into Chapter 7 or Chapter 13 bankruptcy.
For several of them, it was a question of timing.
File when you are broke, I always say. Some folks get through the time of being broke, then consider bankruptcy when they find a job and the creditors are suing or garnishing paychecks.
As with much Congress does, there is a double standard. If you ran up your debts in a failed business, you skip the bankruptcy income tests.
And, Congress being what it is, income in bankruptcy is not the same as, well, income in other statutes they pass, like, the income tax code.
There are two forms reporting income, Schedule I, going forward, and, form 23, the “means test,” the last six completed months BEFORE filing bankruptcy.
The politicians specifically excluded Social Security income from the bankruptcy means test form, but left that open for Schedule I.
The “means test” looks first at the median income for a family your size in your part of the country. Literally, for your county.
That is why I have to run it through the software, which I pay hundreds of dollars a year just to keep current on these type of things, which can change several times over the course of a year.
But that is only step one in analyzing income for bankruptcy purposes.
If you are over the median, you get to fill out six or seven more pages, which allow numerous deductions, like mortgage and car payments, and payroll taxes and union dues.
Bottom line: check with qualified bankruptcy counsel, do not assume you are not able to file.