When you’re in financial distress, you may begin to consider your bankruptcy options. Maybe you’ve heard that Chapter 7 completely eliminates all unsecured debt and leaves you free to rebuild. That’s true. You may also have heard that it is only available to some people, that there’s an income limit that you cannot cross. Chapter 7 bankruptcy is, indeed, means tested. In this post, we will explore what the income limit is for those who want to file Chapter 7 bankruptcy in the state of Wisconsin, and the factors that go into calculating that figure.
In order to file Chapter 7 bankruptcy, you cannot have an income above the median household income of your state. For Wisconsin, that amount is $61,747, based on 2019 figures. The 2020 figures ought to have been made available by the U.S. Census Bureau in September of 2021, but the release of that data has been delayed.
The size of your household matters as well, and the bankruptcy experts at Burr Law can help you know definitively whether or not you qualify for a Chapter 7 bankruptcy. If your income is greater than $61,747, there still may be a way for you to qualify for Chapter 7 bankruptcy.
Importantly, “income” excludes any money received during the actual calendar month in which you file. The median household income is determined by the numbers during the six calendar months prior to the filing. So, for instance, if you generally receive a holiday bonus in December, or your parents give you a monetary gift to help with presents for the children in December, it would be a good idea to file for bankruptcy in December. Filing for Chapter 7 bankruptcy in December will mean that your household income will be calculated based on the numbers from June 1 through November 30. So it is important to determine the best time to file for Chapter 7 bankruptcy. The date of filing should be carefully considered; you want it to work in your favor for the means testing.
You probably don’t consider yourself a business; but it may be possible to file Chapter 7 bankruptcy as a business and therefore avoid the means test. A business filing Chapter 7 does not have to meet the means test. So how could you, as an individual, qualify as a business? Personal tax debt and student loan obligations are usually considered business debt. People with large balances might qualify as an individual filing for a business bankruptcy and avoid taking the means test. If you’re interested in pursuing this possibility, you should definitely consult with the experts at Burr Law.
Deductions can also factor into the determination of your income for the means test.
Here are some of the most common obligations you can deduct from your actual expenses on the means test: Secured debts (like your car or mortgage); Insurance (health, disability or term life insurance); Taxes; Involuntary deductions (like union dues, uniform costs, or mandatory retirement plans); Child care; Court-ordered Payments (alimony or child support); and Familial obligations (like expenses associated with a disabled child; care of an elderly, chronically ill or disabled family member, etc.). Even charitable contributions can be deducted if you can demonstrate that they have been regularly made prior to filing. The professionals at Burr Law can guide you through what expenses can be deducted.
The means test for Chapter 7 bankruptcy may seem straightforward and rigid, but there is more flexibility than first appears. If you are contemplating bankruptcy, it would be wise to consult the experts at Burr Law.