Often individuals with a heavy debt load want to file Chapter 7 but find out they can’t. There is a Means Test. Many middle-income folks are “high earners” in Bankruptcy Land.
What this means is the income in the family exceeds certain thresholds. I have a blog that explains the Means Test in greater detail.
SO WHAT DO YOU DO IF
- a lot of debt; and
- income above the threshold?
I often talk to good folks with situation frequently. And, we discuss what happening in their life.
They tell me they are juggling their debts. Stealing from Peter to pay Paul and the next month stealing from Paul to pay Peter.
They have collection calls and letter; threats of lawsuits; and sometimes actual lawsuits. Threats of garnishments; tax levies; worry about car repossession and home foreclosure and on and on.
With debts hanging over one head there is increased stress. Sometimes creeping in one’s job’s performance. Lack of sleep. Fights with their spouse.
SO, YOU ASK WHAT DOES CHAPTER 13 DO FOR ME, ESPECIALLY IF I HAVE TO PAY ALL THE DEBTS BACK?
- One monthly payment;
- Stops interest on unsecured debts;
- Give an option to include car loans or lets you pay direct;
- Includes any money owed to the IRS;
- Back mortgage payments, if any.
- Back child support payments, if any.
- Student loan debt can be suspended while in Chapter 13.
- You keep any income tax refund you might get.
REAL LIFE SITUATIONS
Married woman with only one dependent. Family income over $110,000; no car nor house. Spouse has only a small amount of debt and so she files alone. You debts total about $90,000. The Chapter 13 payment is under $1,700 per month.
Currently, she pays a helluva lot more per month and the balance of debts keeps going up.
Single Man; doesn’t own a home and no lien on his car; no children nor child support; above the Means Test threshold. About $50,000 in debt. Monthly payment in Chapter 13 about $1,100. He was paying a lot more with threats of a Wage Garnishment.
Single Mom; owns home with little equity; behind on her mortgage; threats of foreclosure; one car with a balance of $14,000; unsecured debts of about $30,000. Income above the Means Test even with mortgage and car deductions. Chapter 13 payment under $1,000 per month and that includes her car.
WHAT DO THESE PEOPLE HAVE IN COMMON?
- Once payment per month; lower than what they were paying before;
- Debt balances going down; not up
- No juggling to pay this creditor or that one;
- No more collection letters;
- No more lawsuits;
- No Wage garnishments;
- No tax levies;
- Peace of mind;
- Light at the end of the tunnel.
ADDITIONAL NOTES:
- You can pay the Chapter 13 payment directly or have it deducted from your pay; the choice is yours.
- Many of our clients are able to finance a car after about one year.
- This article is limited to individuals that exceed the Means Test threshold.
Disclaimer: Blogs on legal matters are for information purposes only and is not to be construed as legal advice.
For more information on The Means Test and your options call today.