The Impact of the Bankruptcy Income Contribution Threshold on Your Filing in Florida

When considering bankruptcy, you may think the only qualification you have to meet is living with overwhelming debt that you cannot pay. However, depending on the type of bankruptcy you opt for and where you live, there are various other thresholds you must meet or fall under – as well as specific actions you’ll need to take before and during your bankruptcy case.

One of the most important is the bankruptcy income contribution threshold. This is an income level that indicates whether you and your household are living at or below the state or federal poverty level, and how that may impact your bankruptcy filing. Depending on where you stand regarding this threshold, your bankruptcy experience can vary widely.

What is the Bankruptcy Income Contribution Threshold?

If you are looking to file a chapter 7 bankruptcy, there is an annual income threshold that your household should fall beneath. Otherwise, you will be subject to further scrutiny of your finances. This amount varies from area to area.

The bankruptcy income contribution threshold for the following house sizes in Florida for 2021 are as follows:

  • Single person – $52,534 per year
  • Two people – $65,935 per year
  • Three people – $70,815 per year
  • Four people – $84,165 per year

If your household contains six or more people, add $9,000 per year for each person living in the household beyond the five-person amount.

What happens if your household exceeds the bankruptcy income contribution threshold? If this is the case, you will be required to fill out a form 122A-2, also known as the means test. This examines your “means” – including assets, income, expenses, etc. – and determines your eligibility for chapter 7 bankruptcy based on its findings.

How to Stay Below the Bankruptcy Income Contribution Threshold – Legally!

There are several reasons why your household may be determined to be in excess of the annual income threshold. Some of these are avoidable. With the right deductions, you can easily sidestep this issue – but remember, honest record keeping and reporting is crucial when it comes to bankruptcy.

Some of the ways your legal counsel may be able to help you avoid exceeding the income threshold include the following deductions:

  • Secured debt payments
  • Court-ordered payments
  • Healthcare costs
  • Taxes
  • Education
  • Childcare
  • Charitable contributions, and more

Generally, any expense that can be considered necessary for your family’s health and welfare – including expenses associated with housing, food, transportation, employment, education, and more – can be deducted during your means test. This means that these amounts will be excluded from your annual income’s “disposable income” – the amount you are able to put toward other expenses, such as debt repayment. This can help you come in under the threshold amount for your household size. Showing that you are unable to allocate the funds to repay your debt will significantly improve the chances of your bankruptcy filing being approved and processed.

If you’re not sure whether an expense can be used as a legal deduction when determining your household’s annual income for these purposes, ask your bankruptcy attorney. They can help you steer clear of mistakes that can cost you the opportunity to file for chapter 7 bankruptcy in Florida.

What Can You Do if You Exceed the Income Threshold?

No matter how many deductions you may be entitled to, some households simply will not come in under the income threshold. That’s okay! There are plenty of ways to find the solution that works for you if this happens.

First, understand that meeting this threshold isn’t a necessity when it comes to being able to file for chapter 7 bankruptcy. It is simply a preliminary requirement that can make filing easier and faster for some families. If yours exceeds this threshold, you’ll just have to fill out the means test – with assistance from your legal counsel, for the best possible result – to ensure that you are still eligible for chapter 7 bankruptcy.

What if you aren’t eligible? In this case, a chapter 13 bankruptcy may be better suited for your circumstances.

Choosing Chapter 13 Bankruptcy

As mentioned previously, households who are not eligible for a chapter 7 bankruptcy due to excess income that is not deductible may qualify for a chapter 13 bankruptcy instead. During a chapter 13 bankruptcy, you will enter into an agreement set by the courts between yourself and your creditors in which you agree to pay a reduced amount on a regular basis until your debts are fully settled. This type of bankruptcy can make settling debt easier and more manageable for those who have simply gotten behind and are having difficult juggling multiple monthly expenses.

One of the requirements for chapter 13 bankruptcy is being able to prove that you have at least enough disposable monthly income to cover the expenses you will incur upon beginning your repayment plan. Again, this means that you will have sufficient funds for this after all necessary deductions. This is often the scenario that families find themselves in if they exceed the income threshold after all deductions. If you or your household are unable to meet this requirement, the judge presiding over your case will not approve your bankruptcy filing.

In some cases, households fall “between the cracks” of qualifying for either of these types of bankruptcies. If this happens to you, it will be imperative that you speak to an experienced bankruptcy attorney in Florida to help you understand your options. Often, more careful calculations or more accurate deductions can help your circumstances fall into one category or another.

For help with your bankruptcy – and understanding the impact of the income contribution threshold – talk to the industry leaders at the Van Horn Law Group. They can assist you in choosing the right type of bankruptcy for your unique situation.

Article Name
The Impact of the Bankruptcy Income Contribution Threshold on Your Filing in Florida
Bankruptcy income contribution threshold is an income level that indicates whether you and your household are living at or below the state or federal poverty level, and how that may impact your bankruptcy filing.
Chad Van Horn
Van Horn Law Group
Van Horn Law Group
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Published by
Chad Van Horn

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