How Income And Assets Affect Your Chapter 7 Filing
Posted on: 21 September 2021
When you file for bankruptcy, you are handing the responsibility for your financial situation over to the trustee for your case. In the case of chapter 7, the bankruptcy trustee has the power to determine whether or not your assets and income will allow you to file and what you can do to keep your property. To learn more about the role assets and income play with a chapter 7 bankruptcy filing, read below.
Your Assets Matter
In theory, those filing bankruptcies are viewed as having no other options but to file. Unfortunately, that is often the true picture of a filer. However, some filers may try to take advantage of the process to rid themselves of unwanted debts. To discourage frivolous filings and to help the courts cover administrative costs, the filer's assets can come under the magnifying glass as a result of filing. That means that the filers' homes, vehicles, bank accounts, and more are part of the chapter 7 process and could be seized by the trustee.
That being said, the bankruptcy rules stop short of leaving filers with no property with which to make a fresh start. Thus the advent of exemptions. Exemptions protect a filer's assets by providing protection through either a dollar amount or by excluding the item itself from seizure. For example, a filer might be provided with $5,000 to use to reduce the value of their vehicle.
Income Matters Too
Along the same lines as the asset issue, the filer's income is also part of the process. As your bankruptcy lawyer completes your bankruptcy paperwork, they will need to understand your income situation. Unfortunately, those who make too much money may have to take more steps to file and some may end up filing chapter 13 instead of 7 due to the income restrictions. As long as the filer's income is not above that of the median income of the state of residence, there should be no issues. The reason for the income restrictions comes back to preventing frivolous and rich filers from using bankruptcy as a financial strategy to increase wealth and decrease debt. If your income is too high, speak to your lawyer about using the means test and certain deductions to keep within the guidelines. Also, certain forms of income can be excluded from the calculations.
To learn more about the way your assets and your income can affect your filing, speak to your bankruptcy attorney.
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