Filing for Chapter 13 bankruptcy — and actually qualifying for it at the end of the process — is not automatic. One important determining factor is your disposable income. The court must be confident that eventually you’ll be able to pay back your creditors. That means that we have to add up all of your regularly incurred monthly expenses. Your total income must be greater than your expenses with some left over — that left over amount is your disposable income.
Fortunately, we’re allowed to use all sources of income to determine your total monthly amount. That includes all sources of income — retirement payments, regular employment income, EDD if you are collecting unemployment, even rental income if you happen to own rental property. The point is that the court is wants assurance that you will be able to pay back what you are proposing to back.
For people still in the workplace this opens a lot of options. However, for people collecting retirement income, Chapter 13 may not be right. Social security and other pension income might be barely enough to cover day-to-day living expenses.
That’s why we need to look at each person’s situation on a case-by-case basis. With all of these intricacies, it’s usually highly advisable to consult with a qualified bankruptcy attorney. If this is your situation, please give me a call today. We can sit down with you and review your income and expenses to determine what you qualify for.