Household Income and Bankruptcy
This blog relates to how household income can impact a bankruptcy filing. In chapter seven, if a debtor’s debts are primarily non-consumer in nature, then household income really is generally immaterial So if the issue is a business reversal that causes a business loan or commercial lease default or tax obligations or tort debt and those claims are the primary debts of the debtor owes, then household income probably won’t matter.
On the other hand, if the debtor’s debts are primarily consumer in nature—-such as a residential mortgage, a personal vehicle loan, most student loan debt, or certain credit card debt–then we do have to look at the household income. The six months preceding the bankruptcy case are reviewed. The income of the entire household is considered even if only one spouse is filing. We review the household income and we compare that to the state median.
The median depends on the household size. It’s anywhere between $51,000 and $108,000 depending on the household size. If the debtor is below that median, that’s a very good sign. That probably means that the case won’t be determined to be abusive. On the other hand, if the household income is above the median, the case still may be fine, but there’s some additional work that has to be done.
A more extensive analysis is then done to determine whether or not the case is presumptively abusive or not abusive. In chapter 13 household income helps to determine the required duration of the plan—namely whether or not a plan may need to be a 5-year plan as opposed to a shorter plan. And household income can be a means of establishing a floor for how much has to be paid back in a case depending on the facts of the case. The analysis in chapter 13 is similar to chapter 7 but not identical.
Our firm is happy to run these numbers and analyze the impact of household income on a potential case. Contact us today, we offer free consultations over the phone or video, or in person. We are Sasser Law Firm. Located in Cary, North Carolina. Feel free to call us, our number is 919-319-7400.
