Bankruptcy For People With High Income
Despite the common misconception that high income earners cannot file Chapter 7 bankruptcy , it is entirely possible that they can. But for a high income earner trying to file Chapter 7 bankruptcy, they must overcome the presumption of abuse and make it clear that they are filing their case in good faith.
Income vs. Expenses
High income earners who qualify for Chapter 7 bankruptcy often do so because they have extraordinarily high debts and daily living expenses. When they take the means test, they are often able to claim the maximum dollar amount for expenses and if they have a large household, it may be enough to qualify them for Chapter 7 bankruptcy. However, the bankruptcy trustee will closely examine the means test for any sign that expenses are unreasonable.
For example, the bankruptcy trustee might not allow a high income earner to send their children to an expensive private school while not paying creditors; but they may allow a reasonable private school expense. The trick with the means test is that there is no set way that a trustee will interpret the reasonableness of expenses taken but there is some indication that certain expenses are scrutinized more closely than others.
If the vast majority (51 percent) of a high income earner's debts are business related, then they don't need to take the means test. This means they can file Chapter 7 bankruptcy regardless of their disposable income. However, the definition of what business debts are is very strict, so if a debtor has a mix of consumer and business debts they should work with their bankruptcy attorney to make sure that they do in fact qualify for Chapter 7 bankruptcy without taking the means test.
Are you a High Income Earner Considering Bankruptcy?
Are you a high income earner that needs assistance or has any questions regarding bankruptcy? If so, don't hesitate to contact us
today and we would be happy to answer any specific questions you may have.