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How income can impact a bankruptcy filing

Chapter 7 can be an appealing legal process for Tennessee residents who wish to eliminate their debts through the process of a bankruptcy discharge. In order to qualify for such a discharge, however, individuals must first qualify for Chapter 7 bankruptcy. Doing so requires that their incomes not exceed certain levels; if they do, individuals may have to find other debt relief options to pursue.

First, a bankruptcy court will look to see if the Chapter 7 filer's current monthly income is below the median income for the state in which they live. If the filer's income is below this threshold, then they may use Chapter 7 bankruptcy. If it is not, they will be subjected to the means test of the legal process.

The means test in Chapter 7 bankruptcy looks at a debtor's income over the prior 5 years and compares it to a statutorily established minimum. If the income exceeds the minimum, then it then it may eliminate the filer's ability to use Chapter 7 to eliminate their debts. Individuals who still wish to use Chapter 7 may fight to justify why they should be able to use the process, but these determinations are made on a case-by-case basis.

When a person's income is too high or other debt-related factors prevent them from using Chapter 7 bankruptcy to eliminate their debts, then they may file for Chapter 13 bankruptcy. It is always important for individuals to understand the requirements of the legal processes they wish to utilize and doing so can be supported by working with experienced bankruptcy professionals who work in their communities.

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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