Timing your Chapter 7 bankruptcy case is an important step in the process, and this is something your bankruptcy lawyer will help you with. There are a number of reasons the timing of a case is important, and one of the reasons relates to your income and the way it can affect your case. Here are several things you should understand about your income and how it may affect your Chapter 7 bankruptcy.
Your income is used to complete the means test
The means test is a standard test used in all bankruptcy cases, and its purpose is to see if a person qualifies for Chapter 7 bankruptcy. With the means test, your lawyer will add up all your income for the last six months. This is done to determine your monthly income which is then compared to the median income in your state. You will qualify for Chapter 7 if your income is less than the median income.
Why timing might be important
If you always earn the same amount of money and never receive any extra types of cash in your life, such as money from an inheritance, timing will not matter a whole lot. Timing does matter, though, if your income is sporadic or if you have or are planning on receiving windfalls of cash. The goal of timing your case is to file when the income you have earned in the last six months will be less than the median income.
For example, if you normally receive a large bonus from work on January 1 each year, this would be included in your income if you filed before July 1. Because of this, you may want to wait to file until July 2 or later, as this would help you qualify for Chapter 7.
The other important thing to consider involves the 180-day rule in bankruptcy. If you receive any money within 180 days before or after filing for bankruptcy, it can be included in your case, and this includes windfalls of cash you may receive within 180 days after filing. For example, if you received an inheritance of cash within 180 days after you filed for bankruptcy, you must let the trustee know, because the trustee has the right to take this money from you. Because of this, you may want to plan for this if you expect to receive any type of inheritance in the near future.
If you need help with your finances and are considering using bankruptcy, you should talk to an attorney to find out if this would be a good solution for your financial troubles. For more information, contact a business such as Jeffrey S. Arnold, Attorney at Law, P.C.