High Income Bankruptcy: Using Chapter 13

High income bankruptcy using chapter 13 provides you with a way to restructure your debt and lower the amount you have to pay. When you declare Chapter 13 bankruptcy, unlike a Chapter 7, your debts are not discharged. Instead, bankruptcy payments are established by a court-mandated payment plan. You will make these bankruptcy payments for a period of three to five years.

High Income

If you have a high income, you are generally not eligible for Chapter 7 bankruptcy. Chapter 7 bankruptcy is traditional bankruptcy in which assets are seized and sold and the proceeds are used to pay off debt. Any debt not paid off through the sale of your non-exempt assets is forgiven. Under bankruptcy laws, you cannot file Chapter 7 if you do not pass a means test. This means if you make more than the median income in your state and/or your monthly income is high enough to pay your debts and still leave you enough left over to live on, you will not be eligible for Chapter 7.

Chapter 13 Payment Plan

You will, however, in most cases be eligible for Chapter 13. When you file Chapter 13, you establish a plan wherein you pay your creditors a set amount each month. These bankruptcy payments will extend for between 3-5 years. The court must approve the payment plan you set up, which means if you have a high income but you try to set the payments very low to ensure you don't pay back all your debt, the court may not approve the plan. Creditors may also contest the bankruptcy or the chapter 13 bankruptcy payments you propose in your payment plan, and the court will consider those objections.

Payment Period

If you are granted the right to a chapter 13 bankruptcy, a trustee will oversee your bankruptcy payments and ensure those payments get to the right creditors. If you do not make all your bankruptcy payments on time, the court may dismiss your Chapter 13 bankruptcy claim and you will once again be subject to standard debt collection form your creditors. If something changes in your income and you cannot make the bankruptcy payments, you may be able to petition for a hardship discharge, but rules and qualifications apply for doing so.

Talk to an Attorney

If you have a high income and are considering chapter 13 bankruptcy to restructure or lower your debts, you should speak with an experienced bankruptcy attorney. A bankruptcy attorney can provide you with detailed information on whether you qualify for a Chapter 13 bankruptcy and on what your chapter 13 bankruptcy payments are likely to be.