New Bankruptcy Income Limits Go Into Effect April 1
The United States Trustee’s Office has published new income limits for filing chapter 7 bankruptcy. Effective April 1, 2016, the annualized gross income cutoff in Wyoming will be $52,258 for a single person with no children at home. The threshold amount goes up with family size ($66,695 for a married couple, $74,333 for a household size of three, $84,167 for a family of four – see U.S. Trustee Program website.) After April 1, a single dad with three children can have annualized gross income of up to $84,167 and still be eligible to file chapter 7. Above these income limits (which are measured by the prior six months’ income not counting the month in which the filing is done) an individual must either file a chapter 11, a chapter 13 or not at all.
The real question, of course, is whether filing for bankruptcy is a good idea. The most common reasons that people file for bankruptcy are divorce, a serious medical event, loss of job or reduced wages. Wage garnishment is often a triggering event because it results in the immediate loss of 25% of net pay, and filing bankruptcy stops wage garnishment. Payday loans with astronomical interest rates can also be a triggering event. One payday lender in Wyoming, in its Truth in Lending disclosures, stated that the interest rate would be 647% and that the total finance charge for a $625 loan would be $3,138, resulting in a total payments of $3,763.53 over 20 months in exchange for $625 today!
As a rule of thumb, if a person can’t reasonably pay consumer debts over the next three to five years, then bankruptcy might be a good idea.
Another factor in deciding whether to file bankruptcy is what the debtor gets to keep. Most bankruptcy filers get to keep their vehicle, clothing, household goods, personal effects and, commencing July 1, 2016, three firearms and 1,000 rounds of ammunition per firearm up to 3,000 rounds. Other things the trustee may take away, such as sporting equipment, 4 wheelers, utility vehicles and the like.
© 2016 Clark Stith
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