Many people incorrectly assume that you cannot file for bankruptcy if you make a lot of money. The primary question will be which kind of bankruptcy you are allowed to file. Also, the court will explore whether your request for bankruptcy protection is in good faith.
You might want to talk to a Georgia bankruptcy attorney if you are asking the question, Can I file bankruptcy with a high income? Here are a few things you will want to know in this situation:
Filing For Bankruptcy In Good Faith
If you qualify for a Chapter 7 bankruptcy, you ask the court to discharge your unsecured debts. Unsecured debts are those that do not have a physical asset that could be repossessed (like a car) or foreclosed upon (like a house) if the borrower defaults on the loan payments. Chapter 7 bankruptcies cancel unsecured debts like credit cards, medical bills, and other personal loans.
Because you do not have to pay these debts if discharged by the court, the judge will want to know if you are using some of your high income to pay for luxury items or things that are not necessities. If you ask the court to wipe out valid but unsecured debts in that situation, the judge will consider it unfair to those creditors and not in good faith.
The Means Test
You will have to pass the “means test” if you want to file for Chapter 7 and get a discharge of your unsecured debts. If you cannot pass the means test, you will need to file for a Chapter 13 bankruptcy. Under a Chapter 13, you will have to pay your creditors, but you get to spread the payment schedule out over several years.
Here is how the means test works – you subtract your bills from your income. That sounds simple, but there are many rules involved. If you have discretionary money left over after paying your bills, you fail the means test and must select a Chapter 13 bankruptcy, not a Chapter 7. It is possible to pass the means test even if you make more money than someone who makes less money, depending on your circumstances.
Chapter 13 Bankruptcy Has No Income Limits
So, you did not pass the means test and cannot file for a Chapter 7 bankruptcy discharging your debts. Are you a candidate for a Chapter 13 bankruptcy? Even if you earn $1 million a year, you might qualify for a Chapter 13 because there are no income limitations with Chapter 13 bankruptcies.
Chapter 13 is a preferable option for many people if their debts are not dischargeable in a Chapter 7 case. If you have a massive tax debt, owe child support, or have student loans, Chapter 7 will rarely wipe out obligations like those. Also, you might want to pay your debts but simply need more time to do so. A Chapter 13 bankruptcy tends to do less damage to a person’s credit than a Chapter 7. Finally, Chapter 13 is a better way to prevent losing your house or car than a Chapter 7 bankruptcy.
A Georgia bankruptcy attorney can help you determine whether a Chapter 7 or 13 is the better option for you, depending on your income, debts, and other factors. Get in touch with our office today for legal assistance in your bankruptcy case.