With a large number of Americans in financial trouble, it is no surprise that many are looking into filing bankruptcy as a way out. The next question that needs to be addressed is: Should I hire a bankruptcy attorney or file on my own? The answer to that is that it is certainly a wise decision to have an experienced bankruptcy attorney in your corner looking out for your best interests. The creditors sure have a lot of weapons in their arsenal when it comes to trying to collect on a debt. Why not level the playing field and have a professional help ensure a successful bankruptcy filing?
If an individual has made the decision to file bankruptcy they should first consult with a bankruptcy attorney to see if they even qualify to file. After the changes to the bankruptcy code back in 2005, there are new guidelines, requirements and restrictions that were added. This includes adding a means test to see if a debtor qualifies to file Chapter 7 bankruptcy. This is where an experienced bankruptcy attorney can use the state's median income guidelines and compare it to the debtor's average monthly income plus other criteria such as family size and monthly expenses. Figuring out current monthly income or CMI is not as straight forward as it sounds. Current monthly income is a highly artificial number that can have huge implications on whether the individual can file a Chapter 7 bankruptcy, or if they make too much money, then they will be forced to file a Chapter 13 bankruptcy. This also dictates the amount of money that the debtor will have to pay the creditors in the repayment plan if they are forced into a Chapter 13 bankruptcy.
Calculating current monthly income, or CMI, doesn't actually mean the debtor's current monthly income as in "this is what my income is currently each month." CMI means using ALL money received by the debtor in the six months prior to the month in which the debtor files for bankruptcy. All "income" means not only taxable income from one's employer, but it includes Social Security, an inheritance, loans, monetary gifts from family, money found on the street, literally any source of money coming in. Then if the debtor files for bankruptcy in July for example, their CMI is based on income received from January through June of that year. If the debtor is a realtor for instance, this can be tricky if they made only one commission in the last year and that was in the six month look back period. This can falsely inflate their CMI and income level disqualifying them from filing Chapter 7 bankruptcy. An experienced attorney can just adjust the filing date to wait until the income falls out of the look back period to ensure qualification to file. In a nutshell, CMI is really neither current, nor monthly, nor income. It is a number that may or may not accurately reflect the debtor's actual income. If that is not convoluted already, we are not done. The bankruptcy attorney then takes the CMI number and divides that by six then multiplies that by twelve to determine the debtor's annual income. That number is compared to the average median income for the state in which the debtor resides to determine if they qualify to file Chapter 7. If the debtor's annual income is slightly over the state's median income the bankruptcy attorney may still be able to qualify the debtor based on number of dependents and scrutinizing the debtor's income and expenses.
Now you can get a better grasp of why it is a good idea to enlist the assistance of an experienced bankruptcy attorney. Filing bankruptcy has become more complicated as of the 2005 code changes. This is just trying to qualify, let alone figuring out various exemptions to protect assets, filling out the lengthy petition properly, etc. A bankruptcy attorney is a valuable asset to your team and plays a key role in gaining financial freedom.
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