When A Creditor Files A Lawsuit, How Does That Complicate A Bankruptcy Case?

Filing a lawsuit does not complicate a bankruptcy case, because any collection case is automatically stayed when you file bankruptcy, which means that creditors have to stop any collection efforts.

Do Most People Assume That If Their Income Is Relatively High, They Cannot File For A Bankruptcy?

If your income is above a certain amount, you have to undergo a means test to determine your eligibility for filing a bankruptcy.

What Might Constitute A High Income And What Factors Could Impact This As It Relates To Being Able To File A Chapter 7 Bankruptcy?

If you are over the median income for your household size in your area, which includes your children, then you have to satisfy a Means Test. The means test performs an analysis of your disposable income based on the IRS allowable expenses as well as your actual expenses. If you’re actual expenses exceed the IRS allowable expenses the means test will use your actual expenses. [For example, if the IRS guidelines say you should be paying a mortgage of $2,500, but you’re paying $3,500, the means test will use the higher amount.] If the means test determines that you have disposable income over your reasonable and necessary living expenses, you are not eligible for a Chapter 7 Bankruptcy. However you may be eligible to file a Chapter 13 Bankruptcy where you will pay a portion of your debts over a 3-5 year period.

In order to determine if you are eligible for a Chapter 7 I would have to determine your average monthly income by examining proof of income for the last six months and compare that income with your average monthly expenses for reasonable and necessary expenses to determine if you have disposable income.

If You Are Over The Median Income, Might You Still Avoid The Means Test Depending On The Type Of Earnings You Have?

No. The means test does not depend on the type of earnings you have, but instead depends on the amount of your income. The only income that is excluded from the means test is social security income.

 What Are High Allowable Expenses?

If your expenses exceed the IRS guidelines (based on your income) in any category, you must show proof of the actual expenses in order to claim them in a Means Test. The Means Test is based upon your gross income, so you can deduct taxes, health insurance payments, and mandatory contributions to your 401K or pension. Medical expenses are also an exception to the IRS guidelines.

For more information on Bankruptcy In New Jersey, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (732) 733-2830 today.