When you meet with a bankruptcy attorney for the first time, you should be prepared to answer some very personal questions, like how much money you (and your spouse if you’re married) make. Contrary to the rules of common courtesy (and up there with never asking a woman how old she is), that question is the foundation of any bankruptcy discussion.
In order to determine whether or not a potential client is eligible to file Chapter 7 or Chapter 13 bankruptcy, I have to know how much his or her household income is. The Bankruptcy Code defines what is and what is not income.
Here are the things that are considered income for bankruptcy purposes:
- Gross wages, salary, tips, bonuses, overtime, commissions – If you are employed, the calculation includes essentially everything you have earned. As you can see, this includes overtime which can obviously increase your income and move someone out of Chapter 7 eligibility. Reducing overtime for a month or two before filing should be considered if Chapter 7 would be the best option.
- Income from the operation of a business, profession, or farm – Income from this source can be reduced by the amount spent on ordinary and necessary expenses to operate the business.
- Rent and other real property income – If you own income property, that income must also be included. Again, though, we will reduce that number by the amount you spend on ordinary and necessary operating expenses, such as paying the mortgage, utilities, maintenance, and property management.
- Interest, dividends, and royalties – This is income that comes from investments such as stock or oil and mineral rights.
- Pension and retirement income – We’ll include any income you’re getting from pension or retirement account payouts.
- Any amounts paid by another person or entity, on a regular basis, for the household expenses of the debtor or the debtor’s dependents, including child support paid for that purpose – We’ll include income that you’re regularly getting from someone else. This won’t include help that you might get from family members from time to time, but it will include child support payments.
- Unemployment compensation – We’ll include any unemployment benefits you’ve received in the six months prior to filing your bankruptcy.
- Income from other sources – Of course there is a “catch-all” just in case there’s something that has been left out.
It’s important to know that certain income will not have to be included in our calculation, such as Social Security income or payments that you may have received as a victim of a war crime, crime against humanity, or as a victim of international or domestic terrorism.
After we have calculated your income, we can determine whether or not you are eligible for Chapter 7 or Chapter 13 bankruptcy. If you have to file Chapter 13 bankruptcy, we can give you a good sense of how much you’ll have to pay your unsecured creditors.
If you would like to talk with an experienced Colorado bankruptcy attorney about Chapter 7 or Chapter 13 bankruptcy, just call 303.331.3403 or use our online scheduling system to set up an appointment. We look forward to helping you!