Every six months to one year, the United States trustee from the US Department of Justice, evaluates the median income for individuals and families, varying from state to state. Because of the economy, recently, the median income for some states has gone down lower. In many cases this is not a good situation for those filing bankruptcy. If you have a large amount of unsecured debt and are gainfully employed, the bankruptcy trustee might push you into a Chapter 13 bankruptcy payment plan. This payment plan typically lasts 3 to 5 years. In the case of the individuals that don't qualify for Chapter 7 by a small margin, this can typically be a set up for failure. With these recent changes, it seems like the court is taking it out on those still working because it's based on income not the amount of debt.
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When calculating your current monthly income in a bankruptcy filing, CMI does not mean your income that you are currently making this month. Actually, monthly income money received by the debtor in the six months prior to the month in which the debtor actually files the bankruptcy petition. Another misunderstanding is that income does not mean taxable income. Basically CMI is not current, nor is it monthly and nor is it income. In fact, it might not even be an accurate snapshot of the debtor's actual income on the date of the bankruptcy filing.
Considering this information, timing is crucial when deciding when to file for bankruptcy. You'll want to plan filing Chapter 7 bankruptcy in a time frame that will show a lower income. The bankruptcy court presumes an individual is abusing the system if their current monthly income is higher than the median income allowed for their state. The best way to eliminate any confusion on qualification is to have a bankruptcy attorney give the debtor the means test. The easiest way to figure out the CMI is to take the total gross amount that the household made in the last six months. Take that number and divide it by 6. Next, multiply that number by 12 and look at the median income chart for your state including how many dependents in your household. This will give you a rough idea whether or not you qualify to file Chapter 7.
After calculating your current monthly income, you can make your final decision on filing for bankruptcy. Remember, current monthly income is basically a number that can have huge ramifications on whether you're allowed to file Chapter 7 bankruptcy or if you're forced into Chapter 13 bankruptcy. It will have a large impact on what you will have to pay your creditors. Make sure you gather all your pay records to give to your bankruptcy attorney before your bankruptcy filing. This will help the attorney to decide on the most beneficial time for the debtor to file. CMI has been in effect since the bankruptcy code changed in 2005. This is one of the many negative aspects of the new bankruptcy law.
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