Your Income Could Make All the Difference
We talked about this in terms of Chapter 7 last week, but we’re going to look at it differently now. So if you’re doing Chapter 13, I’m assuming either you’re losing a piece of property that you want to save, or your income is over the median.
You might recall from our discussion on Chapter 7, the IRS puts out standards every quarter, usually four times a year, at least a couple times a year, that say this is the poverty line basically or the median income. Really it’s talking about the middle income, but it’s saying if you’re at the lower half, you’re on the lower end, and if you’re on the upper half, you’re on the upper end. And that’s used as the cutoff by the bankruptcy court.
So if you’re above, then you have to do a 13 versus a 7. You’re not allowed to do a 7, although your expenses may bring you back down. And you have to do a five-year plan where you pay what you can, not what you owe, but what you can. And that’s what a 13 is.
Now you might make less than the median, but you’re losing your house and you need a way to force the bank to let you catch up. So you might file a Chapter 13, even though you could file a 7, for those kinds of reasons, because of these extraordinary powers.
So that’s the first thing you want to look at. Where does my income fall? Is it over the median? Because if so, again that’s about 45 to 50 thousand for one person, and then add about 10,000 for each other household member. If you got kids, it helps qualify for a 7. You know, if you got four kids, now you’re at five, you’ve just added 40,000, you know, now you’re up 80,000, 90,000.
So first factor to look at again is income. And then tomorrow we’re going to look at what kind of debt have you got and how are we going to treat it in the plan. Again, similar to what we looked at for 7, but in a different way.
Incidentally, if you are below the median and you file a 13 for whatever reason, you can have a plan as short as 36 months or three years. So you’re not required to do five years. If you’re over the median, you have to do five years. If you’re under the median, you can do as little as three years.
Now if you’re saving your house and you’re so behind it’s going to take you five years to catch it up, you may want to do a five-year plan anyway, but you can do as little as three years.
So as always you can reach me, a Chapter 13 bankruptcy attorney in Oklahoma, at Edward Kelley Law, K-E-L-L-E-Y-L-A-W at gmail.com or call me at 580-478-3130 and we’ll be back tomorrow with another Three Minutes to Financial Freedom and the third video in this series on is chapter 13 right for me.