Calculating Income in Chapter 7 Bankruptcy

Answering the Question: Do I Make Too Much?

I hear this question on a regular basis; “Do I make too much to file?”  Although the question seems basic, the answer is actually quite complex. I wanted to write this article to answer an initial consideration, before the above question, that being “how do I calculate my income in preparation of asking “Do I make too much?” You see, before we can even address the question of “Do I make too much to file bankruptcy”, we need to properly consider the income that it is that is being used to calculate “too much”.

The 6 Month Window:

I’m not sure who coined the phrase “six-month window” in bankruptcy, perhaps it was me though I doubt it very seriously. I use that phrase in speaking with clients here in St. Charles County, to address what period of time is being considered regarding your income and the Chapter 7 and Chapter 13 filing requirements. In a bankruptcy, it is the income from that six-month window time period that is to be considered in addressing the income requirements for the bankruptcy. The term refers to the 6 months prior to the month of filing. Say for example that you intend to file a Chapter 7 bankruptcy petition on December 23rd. In that case, the Bankruptcy Code will require an evaluation of your income for the months of June through November (6 months). If you file in January, then that 6-month window would be July through December.

It’s a fairly basic principle that can have a very difficult application in some instances. So, to address the question of “Do I make too much to file a bankruptcy?”, the first step will be calculating all of you your income looking at the last six months prior to the month of filing.  This includes income or “money received” from all sources.  While certain types of income may be excluded from the calculation, you need to provide your attorney with everything received, from employment income to social security, from unemployment to gambling winnings, any money you’ve received in the prior 6 months, from any source, should be disclosed to your attorney for analysis. At my office, we typically ask our clients to provide us with the pay advises (pay-stubs) from that time period.  With a few exceptions, this will provide the necessary information for calculating the income for purposes of the Chapter 7 bankruptcy analysis.  Once we have this information, and only once we have this information can we begin to address the means test in determining your eligibility for bankruptcy.

Bankruptcy is not an easy concept, and it should be left to a professional. Working with your bankruptcy attorney and providing them with all of the essential information is critical to the success of your case and ultimate discharge. Be sure to disclose all sources of income, not just income from employment. Social Security, Unemployment, Bonuses at work, and gambling winning are just a few examples of what all must be considered. Certain forms of income will not count against you in the ultimate consideration, but you need to disclose all income to your attorney. You should always consult with an attorney before taking any action. Feel free to give me a call with any questions you may have in this regard. This very important calculation could make all the difference in the success of your case

Guss Markwell is a Bankruptcy Attorney in St. Charles County and St. Louis Missouri. Call today to schedule a free initial evaluation.