Some people simply make too much money to be eligible for Chapter 7. These people are sometimes stuck in a Chapter 13 scenario that they simply cannot afford. If you make too much income for Chapter 7, you do not necessarily need to do a Chapter 13 bankruptcy. Sometimes circumstances can change that can make you eligible for Chapter 7.
If you are stuck in Chapter 13 due to income, you can sometimes simply have a drop of income to get into Chapter 7. First, ask your attorney how far over the median income you or your family currently sit right now. If your attorney says that you are $20,000 over the median income line, consider whether a $20,000 drop of income could be coming somehow in the future.
Very frequently income drops due to yearly cycles or the dropping of overtime. Other times, employment can be coming to an end or a job is simply too demanding to continue. In such cases, it may be better to wait until your income drops to the desired amount and then simply file for Chapter 7.
Also, sometimes one spouse in a family only periodically works. Or, sometimes a spouse simply works to barely pay the large barrage of debts the family has been facing over the years. If one spouse simply cannot continue working as they have in the past, then the family may have an income drop sufficient to file for Chapter 7. This income drop would probably need to be present for at least 6 months, or essentially the entire Chapter 7 bankruptcy processing time. Of course, the best scenario for Chapter 7 is that the income drop is simply permanent for the foreseeable future.
In some rare cases, spouses will separate into two households in the time period when they are considering bankruptcy. In such cases, there would become two separate households. You would not be required to count each other’s income together. Sometimes this will allow one or both spouses to then file under Chapter 7 bankruptcy instead of Chapter 13.
This “separation” situation is more common than a lot of people may think. This is because bankruptcy and marital problems frequently come hand-in-hand. Bankruptcy is extremely common around the time of divorce. Also, spouses frequently have bad fights over financial matters that cause them to either temporarily or permanently take up separate households. It is common for a spouse to move out and get their own apartment during extreme financial disputes. Although these can be saddening situations, a good note could come of it. It may make the spouses eligible for Chapter 7 separately. This could at least eliminate the financial side of the marital tension.
Sometimes a large increase in expenses can also change circumstances to get a person in to Chapter 7. This is especially true when additional family members move into the household. If all asudden Grandpa and Grandma require in-home care, you may have enough dependents now to be eligible for Chapter 7. Children can also have a large impact on eligibility if a group of children or grandchildren have recently taken up permanent residence in your home.
Otherwise, only large expenses will likely have an impact on Chapter 7 eligibility. Expenses such as extremely high medical care, nursing home bills, child support, or other large expenses are probably the only ones sufficient in size to have any hopes of making a large difference in eligibility. Dependents are much more effective increasing eligibility because they raise the median income line itself instead of only offering basic deductions.
If you simply cannot afford Chapter 13, then it is worth your time to consider such items as described here or even other avenues to see if Chapter 7 could be available. Although Chapter 13 may be the only option in many cases, other cases may find changing circumstances that will make them very much eligible for Chapter 7. This could possibly help you or your family achieve debt relief much faster than a 5 year Chapter 13 plan.