Will Bankruptcy Eligibility Income Limits Go Down?

Since November 1, 2016, the annualized gross income cutoff for filing chapter 7 bankruptcy in Wyoming has been $59,227 for a single person with no children at home.  The US Trustee’s office usually announces updated income limits in April or May of a given year.  Given the lag time in data reporting, it is possible that Wyoming’s sluggish 2016 economy will cause a lowering of the threshold maximum income after May 1, 2017.  If that happens, some people who could file chapter 7 bankruptcy now may be ineligible later.

The threshold amount goes up with family size (currently $71,074 for a married couple, $79,220 for a household size of three, $81,839 for a family of four – see U.S. Trustee Program website.)

Sometimes it makes sense for only a husband to file bankruptcy and the wife does not (or vice versa).  That is permitted, whether or not the couple live together, so long as the living arrangement is disclosed.  If they have separate households, then the non-filing spouse’s income is ignored for eligibility purposes.  If they live together, the non-filing spouse’s income counts toward the eligibility income limit.

There is no box to check on the bankruptcy petition where a husband and wife live separately but want to file bankruptcy together.  Filing together is permitted and typically more efficient because they pay only one filing fee.  The US Trustee’s office has indicated that in this situation, for mean testing purposes the additional household expense may in some limited cases be used to allow filing a chapter 7 even where the couple’s household income is otherwise above the chapter 7 limit.

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.

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, since 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.

© 2017 Clark Stith

We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code.

Written by

No Comments Yet.

Leave a Reply

Message