How Will the Court Evaluate My Seasonal Income for Chapter 7 Bankruptcy?
Transcript:
Hi, I'm Matt McArthur, attorney at Clear Counsel Law Group. I had a question submitted to me recently from a teacher. The teacher makes approximately $80,000 a year. She works nine months out of the year and takes the summer months off. Her question is: Do I have too much income to be able to qualify for a chapter seven bankruptcy, and if I were to file in September just after the summer months in which I'm not receiving any income, would that make a difference?
The answer is it depends, as with many answers in the legal field. First off, we would have to know what your household size is. When you're going through the chapter seven means test analysis, what we do is we look at the household size in comparison to the state that you live in and what the median income is for a household of that size in that particular state. If she were an individual filing bankruptcy and making $80,000 a year, it would be much more difficult to get this individual to qualify than, say, if she had a household size of five individuals.
Now, she is correct in assuming that if there's a gap in income right before filing bankruptcy, that is going to count against the six-month income average that we're looking at. What the court looks at is the average income over the six months prior to filing your bankruptcy. If you weren't receiving income during any of that time frame, obviously that's going to lower what the average is going to be during that time frame and it's going to make it a little bit easier to pass the chapter seven means test.
The answer is possibly. You would have to meet with an experienced bankruptcy attorney that has sufficient experience dealing with the chapter seven means test, provide them with six months of pay stub history, and allow that attorney some time to do an income analysis to determine whether or not you would qualify. My guess is that with three months of no income at all, that would essentially cut her income in half. It would probably allow this individual to qualify for chapter seven bankruptcy. But again, you would have to do the analysis, run the numbers with what the actual pay stubs say for a definite answer on that.
This is Matt McArthur at Clear Counsel Law Group talking about the chapter seven means test and seasonal income. If you have any questions, make an appointment with an attorney and he or she will be able to guide you through this complicated process.