What happens if my income changes after I file a chapter 7 bankruptcy case?
The criteria of a chapter 7 must be met at the time of the filing. One of the criteria is that the debtor’s projected household monthly income must be less than the household’s necessary and reasonable monthly expenses. The expenses include necessities such as the mortgage, auto, food, clothing, transportation, and utilities. The expenses do not include payments on credit cards. In other words, whether or not the projected household income is not sufficient to pay all of the projected reasonable and necessary monthly expenses.
The projected income is based on the debtor’s household’s income at the time of the bankruptcy filing. If the debtor lost his income one month prior to the filing and is receiving unemployment, the unemployment income is included as part of the household’s income. If the debtor obtained employment two days prior to the filing, the new unemployment income is included in the projected household’s income. If the debtor is unemployed at the time of the filing and obtains employment two weeks after the filing, the new employment income is not part of the projected income, but rather the unemployment.
Also, the debtor’s household’s monthly income for the six months prior to the filing must be less than the average income of a household of the same size in New Jersey for the six month period. Or, alternatively, if the income is in excess of the New Jersey’s average, the criteria may still be met if the household income is less than their monthly expenses for said six months prior to the filing. The expenses are based on the IRS allowable standards based on the household size.
The income for the six month period is based on the amount earned during the six months prior to the filing. If the debtors’ income changed during the six month period, the changed amount must be averaged into the calculations. However, if the debtor loses his job or his income is substantially reduced prior to the filing, the debtor may be permitted to argue that due to the substantial change in circumstances of income, the court should not consider this criteria and look only to the projected income and expenses. If the debtor’s income is substantially reduced after the filing, the debtor may also argue substantial changes in circumstances. If the debtor’s income increases after the filing, the increased income will not affect the result of the criteria.
Robert Manchel, New Jersey chapter 7 bankruptcy lawyer, can be reached at (866) 503-5655, to answer your questions about bankruptcy protection.