Is the economy improving? Will I be “means tested” out of bankruptcy if I get a good paying job?

I don’t know if the economy is improving but if you are going to be starting a new job soon it could mean that it’s a good time to file bankruptcy.  If you have been unemployed and you have a lot of debts that you wish to discharge in bankruptcy then it might be good for you to file before you get a new job.  If the economy is actually improving then so will job prospects.  If you get a new job then this will possibly impact your ability to file.  If you make too much money you may be “means tested” out of bankruptcy.  There are limits to how much income you can make and still file a chapter 7 bankruptcy.

The means test was added in 2005 to force people into a chapter 13 so the creditors could get some sort of payments on their debts.  The law was lobbied for and written by the credit card companies and big banks (same thing).

At the time of this article in San Diego county income limits range from just over $47,000 per year for an individual to $77,596 for a family of four.  (You add $7,500 per year for each family member after 4 people).  If you make more than these amounts that are allowed for your family size then you would go into the means test.  When you are in the means test then all of the deductions for mortgages, cars, healthcare, charity, and taxes are subtracted from your income to see if you pass.  If you do not pass the means test then you must do a chapter 13 bankruptcy as you are “means tested” out of a chapter 7.

It is far better though to not go into the means test at all.  It is better to fall below the means test cut-off line and not take the test at all.  If you file while you are still unemployed or soon after you job starts then you will have a higher chance of coming in below the means test limits.

If your income is going to go up significantly then it is a good time to file sooner rather than later.  The means test looks back six months so if you just started a job then you would still be okay but don’t delay the filing and risk not qualifying for a chapter 7.   A chapter 7 will allow you to eliminate all of your dischargeable debts and then get a fresh start as you move on with your life and your new job.

Remember that most people can keep most of their assets in a bankruptcy and most people can eliminate all of their dischargeable debts.  Some debts are not dischargeable but consult me or another bankruptcy attorney if you are wondering which debts are dischargeable.  Also you can file alone and your spouse does not have to file with you.  Bankruptcy will remain on your credit report for up to ten years but with the proper re-building most people can get their score up significantly after two or three years.

So bankruptcy is not the end but a new beginning!  It is a fresh start that many need!  It might be a good time to file now though if you are going to start a new job so you can start a new life debt free!

I am San Diego bankruptcy attorney.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!  For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at farquharesq@yahoo.com.

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