Name: Attorney Mark Buckley, CFP
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RI Bankruptcy Law: Median Income Figures Change Again

RI bankruptcy lawyers have new income guidelines to determine who qualifies for Chapter 7 bankruptcy relief. On November 1, 2012, the US Census figures became effective for all new consumer bankruptcy filings. Other than for 3-person households, it became slightly more difficult to qualify for Chapter 7 bankruptcy relief for every other household size in Rhode Island.

Below are the median income figures that I use for my Rhode Island clients who need to file for bankruptcy protection:

1 person household $ 45,945 (down from $ 47,798)
2 person household $ 60,538 (down from $ 61,506)
3 person household $ 75,306 (up from $ 68,909)
4 person household $ 82,086 (down from $ 88,990)
Add $ 7,500 for each additional household member above a 4 person household

As a reminder, these are gross income figures. To determine whether you qualify for Chapter 7 bankruptcy relief, we take your trailing 6 months of gross income from all sources (except Social Security and unemployment benefits), multiply it by two and then compare it to the chart above.

While its easier to qualify for a Chapter 7 bankruptcy with gross income lower than the median, in many cases, you may still qualify with income slightly higher than the median.

Bottom line: Its impossible to forecast whether it will become easier or more difficult to file your Chapter 7 case in the future. Even if you are not ready to file your case now, I can run an analysis on your family’s income to see if your income is presently low enough to qualify for debt relief.

Rhode Island Bankruptcy Debtors Catch a Break

by Mark Buckley

Twice a year, the US Census Bureau and the IRS provide data used by bankruptcy lawyers to determine who qualifies for debt relief. On May, 1, 2012, the new income numbers became effective for all new bankruptcy case filings. The good news is that median income figures rose for all household sizes in Rhode Island.

Below are the new median income figures that I will use for my Rhode Island clients who need to file for bankruptcy:

1 person household $ 47,798 (up from $ 46,335)
2 person household $ 61,506 (up from $ 59,624)
3 person household $ 68,909 (up from $ 66,800)
4 person household $ 88,990 (up from $ 86,267)
Add $ 7,500 for each additional household member above a 4 person household

As a reminder, these are gross income figures. To determine whether you qualify for Chapter 7 bankruptcy relief, I will examine your trailing 6 months of gross income from all sources, except Social Security and unemployment. I will then double the gross figure and compare it to the chart above.

Bottom line: Many more who need to file for bankruptcy protection in Rhode Island now qualify. This window of opportunity may only be available for a short period, so if you are considering bankruptcy, call a qualified RI bankruptcy attorney today.

Rhode Island Bankruptcy Information

by Mark Buckley

You’ve done your best to repay creditors, but now there is not enough money to go around. Interest rates have skyrocketed, minimum payments have tripled, and you’ve fallen behind on several accounts. If you need to protect your house, your car, and stop all collection activity, will filing bankruptcy help?

If bankruptcy is the solution, will you be filing a Chapter 7 or a Chapter 13 case?

To understand the differences between these two options, let me try to paint a picture. Imagine standing outside the US Bankruptcy Court with all of your bills in hand. As your stare at the building, you notice there are only two doors to gain entrance; one door is very narrow while the second door is very wide. Its easy to see that one door is designed to keep people out and the other seems to let everyone in. Which door should you try to enter?

Well, the narrow doorway is like a Chapter 7 bankruptcy. People who earn too much income will not be able to enter and cannot file a Chapter 7 case. Only those whose gross household income (during the prior 6 months) falls below the median income (of other similar households) are permitted to file a Chapter 7 bankruptcy. A Chapter 7 bankruptcy takes 90-100 days, costs less money than a Chapter 13, and allows you to discharge most debts. Even though the doorway appears narrow, about 92% of bankruptcy filers in Rhode Island qualify and are able to enter for debt relief.

To understand a Chapter 7 case better, lets consider the following example. The median 6-month income for a Rhode Island 4-person household is presently $ 43,501 gross (0r $ 87,002 annually). If your 4-person household gross income in the past 6 months (not including Social Security income, or unemployment benefits) is lower than $ 43,501, you can enter the narrow doorway of a Chapter 7 bankruptcy. Just remember that you cannot enter the Chapter 7 doorway twice within in eight year period and time is measured from the date of your prior filing.

So what is the other doorway and why is it so wide? The second door leads to a Chapter 13 filing and is wide because bankruptcy law encourages the repayment of debt where there is ability. A Chapter 13 petition is, essentially, a 5 year repayment plan and is for those who either earn too much income, or are trying to protect property that could be lost in a Chapter 7 case. In Rhode Island, less than 10% of all bankruptcy cases are of the Chapter 13 variety.

I hope you now understand your choices a little better. It really comes down to your household income and your ability, or inability, to repay unsecured creditors. While its possible to file a Chapter 7 bankruptcy if your income is higher than the median income, I would need to perform an analysis and ask you a number of questions to see if you qualify for immediate debt relief. If you show me your pay-stubs for the prior 6 months, I can let you know your options. We can also develop a plan for filing down the road if your income is only temporarily high.

RI Bankruptcy Means Test

by Mark Buckley

Since 2005, the bankruptcy “Means Test” has been used to determine who qualifies for Chapter 7 bankruptcy relief here in Rhode Island. It acts as a “gatekeeper”. The Means Test attempts to measure the cost of living in Rhode Island and how your gross income compares to that of other families of the same size.

The test is arbitrary and has had some unfair results.

For each state, the census calculates the median (middle) gross income for all family sizes. A person filing for bankruptcy must then show all the gross income generated in their household for the prior 6 months, double it, then compare that number to the census figure.

If their gross income falls below the census figure, they pass the means test and can move forward. If their gross income is higher than the census figure, the process gets very complicated and can prevent a debtor from filing a Chapter 7 case.

Failing the Means Test often means having to pursue relief under Chapter 13 of the bankruptcy code which is a 5 year repayment plan.

On November 1, 2009 there will be new income limits for Rhode Islanders who are contemplating a bankruptcy filing. Only households of 2 or 3 persons will find it easier to file bankruptcy after the change. Single persons and households larger than 3 will find it more difficult.

Here are the new median income figures for RI households that will be used for Means Testing effective 11/1/09

1 person $ 45,222
2 people $ 62,806
3 people $ 76,846
4 people $ 87,002
5 people $ 93,902
6 people $ 100,802
7 people $ 107,702
8 people $ 114,602
each additional person add $ 6,900

But what counts towards gross income? And how do we calculate family size for income comparison when there are so many living arrangements these days? These are good questions and cannot be answered in this article because every case is different.

If most/all your income is being used just to pay monthly credit obligations you need advice today. Call 467-6800 for a free telephone consultation, or leave some contact information and I will be happy to call you.

RI Bankruptcy Law: Median Income Figures Change Again

Rhode Island Bankruptcy Debtors Catch a Break

Rhode Island Bankruptcy Information

RI Bankruptcy Means Test

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