Annual income and family size affect bankruptcy filing

Annual income and family size matter in the determination of which bankruptcy is right for them

A few essential questions to ask when considering bankruptcy:

1. What is my annual income?
2. What is my household income? The income of a spouse (whether filing or not) of domestic partners or even of other adults living in the home could make an impact.
3. Do I have any other types of income (worker’s compensation benefits, unemployment benefits, social security benefits, 401(k) distributions, income from sale of assets, etc.)?
4. What is my household size (including minors, emancipated children, and dependent adults)?

Median family income by family size can be found by logging onto www.mdfl.uscourts.gov.

The answers to the above questions are just the first step when a qualified professional determines whether a person qualifies for Chapter 7 or Chapter 13 bankruptcy. A lay person should not be deterred by the answers found in the median income tables.

Many other factors go into the determination of what Chapter a person is eligible to file: prior bankruptcies, equity in real estate or personal property, reason for seeking the bankruptcy in the first place, and recent financial transactions –such as trust creation, preferential payments and more.

Our Jacksonville FL Legal helpers office offers a no cost consultation to help the prospective bankruptcy client determine what is right for him or her. Anyone facing financial difficulty should take advantage of this resource to determine his or her course of action.

Clients want to know "Why?"

Client to Bankruptcy Attorney - "Why are you telling me that I need to pay the bankruptcy trustee when my friend filed a Chapter 7 and paid no money to the trustee ?"

Basically, the answer is - "You have a Chapter 7 "Asset" Case and your friend had a Chapter 7 "No Asset" Case."

Let's break this down - All states have exemption allowances. In Florida, for example, the bankruptcy code exempts $1000 for Personal Property and $1000 for one - Motor Vehicle. (Note - other exemptions apply but will not be dealt with in this article).

Simply put, a client who is an individual filer is allowed a $1000 exemption for his Personal Property which includes items such as furniture, cash, jewelry, etc. If the client's assets go beyond the $1,000 value, then this would be considered an "Asset" Case. As such, the client could expect the Bankruptcy Trustee to file an objection to exemptions, and this client would generally pay the difference between the dollar value of his assets less the $1,000 exemption permitted under the bankruptcy laws.

Another area where this occurs frequently deals with the Automobile Exemption. Here in Florida, a client is allowed a $1,000 exemption on one motor vehicle. Basically, if the client has a vehicle that is paid in full he would generally have to pay the trustee the fair market value of the vehicle less the $1,000 exemption. When a client has an Asset Case, he can keep his property and/or auto, but he will do what is called a "buy back" In general, the client will pay the trustee the value of his assets over the exemption(s) within a 12 month period. So, if you have paid in full vehicle worth say $4000 then the buy back would be $3000. (Value of the Vehicle $4000 minus the $1000 Automobile Exemption.)

Now - where does this "buy back" money go? Simply put, the trustee will disperse these funds to the creditors to whom the debts are owed.

It is important to seek legal advice from an attorney who knows the laws and can evaluate your case to best apply your state's exemptions. Remember - a bankruptcy attorney does not only review your debts. Your assets are part of the equation.