Bankruptcy Secrets
New Bankruptcy Income Test
Under the old bankruptcy law your income didn't matter much. The court had wide latitude in determining if your income was too high to allow bankruptcy. Under the new bankruptcy law the court will have much less freedom.
Under the new law your income will determine if you can have access to the traditional Chapter 7 bankruptcy which will allow you to cancel your debts permanently. Now, if your income is too high, you'll either be forced into a painful five year long Chapter 13 debt repayment program or be denied access to bankruptcy entirely. It will all be determined by your income.
The new formula goes something like this. If your income (as determined by your most recent IRS tax return) is above the median income for your home state, you'll be forced into the less desirable Chapter 13 deal which will require you to repay all your debts over either three or five years. We can't possibly provide tables for all fifty states so here is a rough estimate of the numbers involved. Do not make decisions based on these numbers. Check with an attorney for the exact numbers in your state.
The national average incomes for the entire US in the year 1997 are:
Family of one - $18,762.
Family of two - $39,343
Family of three - $47,115
Family of four - $53,165
