In today’s economy, is bankruptcy only for low-income people?

Since 2007, we have seen the US economy go through major changes due to banking and political policies. While the mainstream media keeps trying to say that the economic numbers show a recovery, they are obviously not out on the streets talking to real people. The median American income is now close to $30,000. The sad thing is that the poverty level in the United States is someone who earns $24,000 a year. So when most people earn less, there is no way for the economy to improve, since people have less money to spend. On top of that, we’re seeing inflation and all the basics, from gasoline to food to housing. Recently, it was reported that 51 million American households are receiving food stamps. With the total number of people receiving food assistance reaching over 100 million and when you consider that there are only a little over 300 million living in the US, it just doesn’t add up. I don’t see how anyone can honestly believe that we are seeing an economic recovery.

Since the bankruptcy code changed in 2005, it has become apparent that it is much more complicated to file a Chapter 7 bankruptcy than it was in the past. Now, someone cannot earn $200,000 a year and file for Chapter 7 bankruptcy. In 2005, a means test was added to the bankruptcy code that made a person eligible to file for Chapter 7 bankruptcy. This was intended to make people who can possibly pay off at least some of their debt file for Chapter 13 bankruptcy. What the means test does is it takes the income from the last six months before filing bankruptcy and divides it by six , just to multiply them by 12 to get the median household income for that person. This number will be compared to the median family income table sent by the Census Bureau. The chart takes into account the number of people residing in the household and the cost of living in that area. If the person earns less than the median income, they may qualify to file for Chapter 7 bankruptcy.

Just because a person is above the median income does not mean they are eligible to file Chapter 7. A person must also complete an income and expense report which must show that they have no disposable income after moving all of their household expenses. This is where a bankruptcy attorney can figure out how to manipulate the numbers to qualify a person who may earn more than the median income chart. Basically, the bankruptcy court wants to make sure that the person has no more than $170 a month in disposable income after paying all household expenses. Expenses do not include debts that will be discharged in bankruptcy.

To answer the question, filing for bankruptcy isn’t just for low-income people, even in today’s economy. A good bankruptcy attorney will know when to pull the trigger and get the most out of the legal process. As the economy continues to wallow in mud, Americans need to be more realistic about what is happening, even if it means filing for bankruptcy. When I was a kid, my parents used to always say, “Don’t believe everything you’re told.” This statement applies to everything in or about the news today. People need to remember what Thomas Jefferson said: “Boldly question even the existence of a God; for, if there be, it ought to approve more of the homage of reason than that of blindfolded fear.” Today the ability to be a critical thinker is gone and everyone takes everything at face value.

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