As usual, the Attorney always will say “it depends.” But yes, it is possible. It all depends on the type of debt you have. Generally speaking, debts scheduled in bankruptcy proceedings are either considered consumer debts or non-consumer debts. If you can prove more than ½ your debts are non-consumer debts, it doesn’t matter how much you make!
In enacting the Bankruptcy Code, Congress had the free market and capitalism in mind. In doing so, they did not want to eliminate Chapter 7 Bankruptcy Protection to those individuals who incurred primarily non-consumer debts. The idea was to promote risk taking in starting businesses without fear, and not penalize those individuals for business debts, taxes, etc. So what does all this mean? Well, if you have primarily non-consumer debt, the new “means testing” bankruptcy laws don’t apply to you. Likewise, the old laws which compared your income in schedule I with your income in schedule J, also do not apply. Your income doesnt really matter with primarily non-consumer debt. You could $1,000,000 per month income and still eliminate your debts!
So what exactly is consumer debt and non-consumer debt? Generally, the following are definitions of consumer versus non-consumer debts:
Consumer Debts: Debts primarily for personal, family, household purposes. These usually consist of the following: Credit Card Debt, Personal Loans, Payday Advances, residential real estate loans, personal car loans, legal fees relating to family and household(divorce, support, etc), Child and Spousal Support, dental work, jewelry, personal utilities, personal insurance, property settlement payments in divorce, etc.
Non-Consumer Debts: Taxes, Business Debts, Automobile Accident Debts, Debt incurred for motive for profit, investment real estate debt, car loans on business vehicles, business utilities, business insurance, business credit card debt, etc.
Grey Area: The following debts may be consumer debts or non-consumer debts depending upon the circumstances: Student Loans, Medical Debt, Real Estate Debt, Credit Card Debt, etc.
In light of the recent declining real estate market and all those “flippers” and other investors out there with more than one piece of real estate, chances are that these individuals may now be able to unload all that negative equity with a bankruptcy proceeding, even if they have substantial income! Not only does this remove all exposure from those creditors, but also eliminates all the tax ramifications that may ensue from the forgiveness of debt situations that might take place outside of bankruptcy.
Bottom line, always seek professional legal advice to determine whether you have primarily “consumer” or “non-consumer” debt. The closed doors to high income debtors may actually be open for bankruptcy relief, or with a little planning, such doors could be opened!
Written by Michael Doan– Owner of the Carlsbad Bankruptcy Attorney‘s office, Michael not only manages his business, but is also a highly skilled San Diego Bankruptcy Attorney with over 17 years of experience. He specializes in many fields, such as: insolvency, bankruptcy, consumer rights, debt negotiation, creditor collection abuse, estate planning, contracts, real estate, and tax. Michael is currently concentrating his practice solely in Bankruptcy Law and is a Board Certified Specialist in Consumer Bankruptcy Law by the American Board of Certification, one of only fourteen such attorneys in all of California.
Quality Escondido Bankruptcy Lawyers can be hard to find these days, but over at Doan Law Firm we take pride in the quality of our work and our clients are our number one priority.