As a high-net-worth individual, you may assume that your yearly earnings are enough to keep your debts at bay. But, unfortunately, you may fall into bad financial habits that make it more and more difficult to keep up. Follow along to find out whether you can file for Chapter 7 or Chapter 13 bankruptcy with a high income and how a proficient Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can point you in the right direction.
Can I file for Chapter 7 bankruptcy with a high income?
Notably, you may still be eligible to file for Chapter 7 bankruptcy even with earning a considerable yearly income. This is so long as you pass the household income means test. From March 31, 2023, the mean household incomes in the state of Kentucky are as follows:
- For a single individual: an income of $51,824 per year.
- For a family of two: an income of $61,945 per year.
- For a family of three: an income of $70,091 per year.
- For a family of four: an income of $87,902 per year.
- For a family of five or more: an income of $87,902 per year, plus an additional $9,900 for each individual in excess of four.
Rest assured, if your yearly household income lands above this mean, you may still qualify. This is if you can successfully argue that your household’s disposable income is not enough to fulfill a Chapter 13 repayment plan. You may calculate your disposable income by subtracting your actual and predetermined expenses from your household income. Examples of eligible expenses are as follows:
- The cost of your monthly mortgage or rent.
- The cost of your monthly utility bills.
- The cost of your vehicles or other monthly transportation bills.
- The cost of your monthly childcare bills.
- Your income taxes and mandatory payroll deductions.
Should I file for Chapter 13 bankruptcy instead?
If you ultimately do not meet Chapter 7 bankruptcy’s requirements for household income or disposable income, then you may still turn to a Chapter 13 bankruptcy. With this bankruptcy type, you may use your high income to restructure your debts and slowly pay them off. This is thanks to the three- to five-year repayment plan that you will be required to set up.
With this, you may wonder whether your high income can help you avoid a bankruptcy declaration altogether. Well, it may be in your best interest to follow through with bankruptcy proceedings if you see yourself dabbling in poor financial practices. For example, your bankruptcy experience may help you get out of the habit of using your emergency funds for everyday purchases or monthly bills. Or, it may teach you to stop applying for additional lines of credit just to make unnecessary purchases.
You must not hesitate and reach out to a talented Louisville, Kentucky consumer bankruptcy lawyer as soon as you possibly can. Our team at Schwartz Bankruptcy Law Center will be awaiting your phone call.