For many people who are struggling financially, the holidays can be a stressful time. Some households rely on credit cards and others simply ignore financial issues until the new year begins. In either situation, early in the year, you may be wondering whether it is the right time to file for bankruptcy. The answer to this question will vary from case to case and the best way to decide the right timing for your bankruptcy filing is to discuss your specific situation with a skilled bankruptcy law firm.
Income and the Means Test
There are many factors that can determine when the right time to file bankruptcy may be. One of these is how much income you have recently earned. This is important to determine which type of bankruptcy you will be able to file. For example, in order to qualify for Chapter 7 bankruptcy, you will need to pass something called the means test.
You cannot qualify for a Chapter 7 bankruptcy if the court decides you have enough income to pay your debts. The means test takes into account your income, your debts, and expenses and if you have too much disposable income, you will have to file for Chapter 13 bankruptcy instead of Chapter 7. Chapter 13 bankruptcy requires you to make payments toward your debts for up to five years before you receive a discharge, so Chapter 7 is often—but not always—a preferable option.
Your attorney can examine the income that will need to be reported on the means test to advise you whether you may be eligible for Chapter 7 or you will have to file under Chapter 13. There are many types of income will be considered by the court for the means test, including:
- Basic wages, tips, and overtime
- Commissions and bonuses
- Social Security benefits
- Rents and interest payments
- Unemployment, disability, or workers’ compensation benefits
- Retirement payments
- Child support
- Any other payments you receive to put toward household expenses
One important type of income to consider is a bonus from work, as many people receive these bonuses at the end of the year during the holiday season.
The means test considers income received during the past six months (excluding the calendar month in which you file). This means that if you received a bonus in the past six months (such as an end-of-the-year bonus), it could increase your income enough to disqualify you from Chapter 7 bankruptcy. This also goes for any cash gifts from your employer, clients, or other work-related sources.
A St. Petersburg Bankruptcy Law Firm Can Help You
You should always have an attorney who can evaluate all of the circumstances of your financial situation including income, debts, taxes, and more. Your attorney can then advise you of the best timing for your bankruptcy case. In some situations, Chapter 13 bankruptcy may be beneficial and/or necessary and the law firm of Berkowitz & Myer is here to help you. Please write to us using our online contact form or call our office at (727) 344-0123 to schedule your free consultation today.