I remember one lawyer telling me she knew nothing about bankruptcy. When someone told her that he wanted to file for Chapter 7 bankruptcy her first thought was what is a chapter 7 and what about chapters 1 through 6? Well, there are no chapters 1-6, but there is a Chapter 7 bankruptcy. Chapter 7 discharges all of your unsecured debts without having to repay any of the debts back to the creditors.
You must know, though, that in order to even be eligible to file for Chapter 7 you have to be under the median income of your town and state. www.legalconsumer.com has a great median income calculator that you can use to calculate your location’s median income by submitting your zip code and number of household members. The Bankruptcy Court looks at the past 6 full months of your income before the filing for bankruptcy.
However, you have to remember that even if you are over the income limits you may still be able to file for Chapter 7 if you have enough allowable expenses that can be deducted from your income. You must calculate household income, not just the individual’s income whom is filing for bankruptcy. You must count all of your income, except for “benefits received under the Social Security Act” and certain payments to victims of terrorism, war crimes, and crimes against humanity. This means that you do not have to count your social security income. It must be listed on schedule I, though, which is the income schedule.
Even if you are living with someone you are not married to you must include her/his income in calculating your monthly median income. (We’ll talk later about how schedules I and J (expenses) interact with the monthly median income.) However, you can also include your partner as a member of your household so this will give you a higher median income limit. You can count all of your household members which also allows you to use a higher monthly median income.
You must access all of your assets before you consider filing for bankruptcy. Where I practice in Western New York if a debtor has equity in a car over $2400.00 then the trustee has the right to take the car, sell it, and divide the profits up among your creditors.
Same with your house, if are filing a single petition then you have a homestead exemption of $50,000 here in Western New York. What this means is that if you have more than $50,000 equity in your house the trustee has the right to take the house, sell it and divide the profits up among your creditors. A couple filing jointly has a homestead exemption of $100,000 n Western New York.
A boat has no exemption or protection in Western New York. There is a long list of exemptions that apply and you have to make sure that the exemptions are legitimate or you may lose your property. Please note that once you’re in a Chapter 7 bankrupt you cannot voluntarily dismiss it. We’ll be posting many more topics in the near future on this complex topic.
If you need help call a Buffalo Bankruptcy attorney at 716-831-1111.