Chapter 7 bankruptcy is one method you can use to find relief from your debts, but this option is not available to everyone. You can only use it if you qualify with your income. If you are wondering how this works, here are three essential things to know about your income with Chapter 7 bankruptcy.
Your Lawyer Must Add Up All Income Sources for Six Months
To use Chapter 7 bankruptcy, you must qualify based on your income. Chapter 7 is not for high earners. Instead, it is designed to help people in lower-income brackets find relief from piling debts. To determine if you qualify, you will need proof of all your income for the last six months or 180 days.
To be clear, the income you must prove is not just the money you earn at your job. If you received any other form of income, you must include it. Here are some examples:
- A bonus from work
- Money earned from a side job
- Child support or alimony you received
- Inheritance money
- Lottery winnings
- Lawsuit settlement
If you received any cash or assets during the last 180 days, you must report this to your lawyer when they add up your income.
The Lawyer Compares the Total Income
The purpose of adding up your income for six months period is to find out where you stand compared to average people in your state. If your income level is higher than the average, you will not be eligible for this branch. If it is lower, you will likely qualify.
You Will Need to Submit Other Types of Documentation
Finally, you will be required to submit other types of documentation to your lawyer if you want to go through with filing for Chapter 7. Your lawyer will need your last two tax returns. They may ask you for W-2s from the previous year or two, and you will also have to submit any other documentation necessary to prove your income and finances. The law requires that you provide these types of forms and papers when filing for bankruptcy, so you should work on gathering them before your scheduled appointment with a lawyer.
Chapter 7 has perks that you cannot find with Chapter 13, yet it is not the branch for everyone. If you have questions about either type of bankruptcy, meet with a bankruptcy attorney to find out more about your options.