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Bankruptcy Myths Part 5 – I Can’t File Bankruptcy if I Make Too Much Money – A Maryland Bankruptcy Attorney’s Perspective


Myths and urban legends abound on the internet.  It’s easy to take a picture and slap a factual claim on it.  Maybe it’s a wrongly attributed quotation, or the claim of a conspiracy theorist.  When I see one of these quotes or claims that just seem a little off, I turn to the urban legend debunkers at Snopes.  Similar urban legends exist about bankruptcy and debt resolution.  Whether it’s a claim by a debt settlement scam artist that President Obama was going to help you get out of debt, or the terrifying story of a man just down the street who filed bankruptcy and lost his house, his car and his dog, you need a resource to help you figure out truth from legend.  As they say, every urban legend comes from a grain of truth, we’ll help you find that grain and ignore the rest.

Part 5

Many People Believe That:  They cannot file for bankruptcy if they make more than the median income.

This is most decidedly false.   There are two parts to the dreaded Means Test.  The first of these is commonly called the Median Income Test.  What happens here is the average of a family’s income over the prior 6 months is computed, then annualized.  That is then compared to the Median Income for households of the same size in the same state.  For example, a family 0f 4 in Maryland would need to have income of less than $108,915 to pass this test at the present time.  These numbers typically changed every April and November.  If you’re family has more than 4 people living under your roof, then you add $8,100 for each additional person.

So, let’s say that your family of 4 makes more than that.  Chapter 7 Bankruptcy in Maryland may still be within your reach.  This is where the 2nd part of the test comes in.  This is the dreaded Means Test?  Why dreaded?  Many Maryland Bankruptcy Attorneys do not like to deal with the means test.  Some will turn a client away if they make more than the median.  The main reason it is so dreaded is because it is complicated and the more aggressive you are with this test, the more likely you are to draw critique of the United States Trustees Office.

For many, however, you don’t need to be all that aggressive.  Present expenses used, when filling out the Means Test are often sufficient to get many people into a Chapter 7 who failed to pass the Median Income portion of the test.

So, what happens if you can’t even pass the Means Test?  Guess what?  You can still file for Bankruptcy Protection.  Your options become limited a little bit.  Chapter 13 is most likely your best bet here.  It may not be what you were hoping for, when you made the determination that you needed to file, but it is not a bad option for many.

Have you been told that you make too much money to file for bankruptcy?  Click our Contact Link or give us a call today at (410) 929-0330 for a FREE consultation with a Maryland Bankruptcy Attorney to find out if you may still qualify.

About the Author:  William Grafton is a Maryland Bankruptcy Lawyer and Co-Owner of the Grafton Firm, LLC.  He has written, lectured, and educated on credit related topics for nearly 10 years and is happy to be bringing his expertise to the Baltimore Metro area.

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